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Connexus : Issue 38
These systemically important banks pose significant risk to taxpayers and are able to exploit a cost of funds advantage over their smaller competitors. It is a problem in the Australian market because the big four banks benefit from the perception that the government would never let them fail. Credit rating agencies take this into account when they assign ratings. The framework to address the systemic and moral hazard risks posed by global systemically important banks (G-SIBs) and domestic systemically important banks (D-SIBs) is being drafted by the Basel Committee on Banking Supervision and the Financial Stability Board (FSB). These international bodies have recently released consultation documents on measures to manage G-SIBs, including capital surcharges of up to 2.5 per cent of risk-weighted assets. The FSB will carry out further work to address D-SIBs. “These policies will serve to reduce the impact of a G-SIB’s failure and will also help level the playing field by reducing too-big-to-fail competitive advantages Regulators move on too-big-to-fail banks Regulators around the globe are tackling the problem of big banks being ‘too big to fail’. By Luke Lawler Microelectronic Solutions Pty Ltd, 26/380 Eastern Valley Way, CHATSWOOD NSW 2067 18 www.abacus.org.au www.abacus.org.au 18 Connexus NEWS