Global watchdog flags slow "too big to fail" bank rule adoption

By Huw Jones
LONDON, March 18 (Reuters) - Many countries have not yet
introduced laws allowing regulators to write down bank's debts
to avoid taxpayer bailouts and prevent them being "too big to
fail", the world's top financial watchdog warned on Friday.
The Financial Stability Board (FSB), which can "name and
shame" those which do not yet comply with its rules, said member
countries that do not yet have these laws include Argentina,
Australia, Brazil, Canada, China and Chinese territory Hong
Kong, India, Indonesia, Korea, Mexico, Russia and Saudi Arabia.
The FSB, which is chaired by Bank of England Governor Mark
Carney, is tasked with coordinating financial regulation for the
Group of 20 economies (G20). Membership of the G20 includes a
commitment to implement rules it has agreed.
In a review of how G20 countries have implemented rules to
avoid a repeat of government bailouts of lenders as during the
2007-09 financial crisis, it said few of its members have
introduced the so-called bail-in tool.
This gives regulators powers to write down a bank's bonds to
top up capital and keep core parts of a bank functioning, such
as customer deposits and payments.
"Only the European Union member states, Switzerland and the
United States are currently able to achieve a creditor-financed
resolution to support continuity of critical functions," it
said.
The bulk of the world's 30 globally systemic banks, such as
HSBC HSBA.L , Deutsche Bank DBKGn.DE , JPMorgan (NYSE:JPM) JPM.N , Citi
C.N and BNP Paribas BNPP.PA , are in these jurisdictions.
Ravi Menon, managing director of the Monetary Authority of
Singapore, who chairs an FSB committee on implementing rules,
said the reforms on resolving or winding down failing banks are
a critical component of addressing the too-big-to-fail problem,
where governments have no option but to bail them out because of
the knock-on damage that would be caused if they did not.
"Substantial work remains to put in place a full set of
resolution powers and recovery and resolution planning
requirements," added Fernando Restoy, Deputy Governor of the
Bank of Spain and chair of the team who carried out the review.
The task force said countries that have not fully
implemented the rules on dealing with failing banks should say
by December what actions they have taken or intend to take.