In addition to trying to ease the current worldwide financial crisis, international regulators have been working on long-range plans to avoid or minimize the adverse effects of a severe financial downturn happening in the future. On Nov. 15, 2008, the leaders of the Group of 20 (G-20) an informal group of Finance Ministers and Central Bank Governors, met in Washington, D.C., to discuss the then still-unfolding crisis and issued a declaration that, inter alia, pledged to “implement reforms to strengthen financial markets and regulatory regimes so as to avoid future crises.”1
Further discussions by the G-20 at its London summit in April 2009 led to issuance of a declaration that proposed additional goals for regulatory reform on both the macro-prudential and micro-prudential levels.2 Since then, the United States and the European Union (EU) have issued papers outlining specific proposals, to be followed up by proposed legislative language. Whether a particular firm is headquartered in the U.S. or EU, any bank operating in those jurisdictions will need to be aware of the new rules that would be governing their ability to operate in these jurisdictions. This month’s column will discuss the general approaches the U.S. and the EU have taken in implementing the G-20 mandate from a macro-prudential, i.e., system-wide, viewpoint.
The U.S. Approach
