On the heels of recent alarming situations in the financial world, Assistant Treasury Secretary for International Finance Brent Neiman stressed the importance of reassessing international financial regulatory cooperation.
Neiman's remarks came during a speech at the Federal Reserve System, IMF, and World Bank International Conference on policy challenges for the financial sector.
"We clearly should pause and consolidate lessons learned," Neiman said during his speech.
Neiman emphasized the importance of addressing key issues arising from the failures of regional banks, global systemically important banks (G-SIBs), and digital asset exchanges. He pointed to the recent collapse of major U.S. regional banks like Silicon Valley Bank and Signature Bank which sparked concerns about the adequacy of current liquidity requirements, contagion monitoring, and deposit insurance frameworks.
Analysts questioned the effectiveness of existing regulations and policies in light of the unprecedented speed and scale of these bank runs.
Social media and the convenience of online banking are believed to have played a role in the swift dissemination of panic and withdrawal requests. Neiman said this alarming situation highlighted the urgent need for regulatory adjustments, enhanced supervision and updated financial policies to effectively tackle emerging risks and ensure the stability of the banking sector.
During the discussion, Neiman shed light on the hurdles encountered by Global Systemically Important Banks (G-SIBs), emphasizing the situation faced by Credit Suisse, which necessitated a government-supported merger with UBS to avert a collapse.
While recognizing the prompt measures taken by Swiss authorities, Neiman underscored the significance of recognizing the constraints of resolution frameworks and enhancing cross-border communication in times of turmoil.
Neiman advocated for improved coordination and dialogues among countries hosting G-SIBs to ensure efficient crisis management and effective planning for resolution. He stressed that these efforts are vital in safeguarding financial stability and mitigating the risks associated with systemic banks.
In addition, Neiman stressed the importance of involving emerging market jurisdictions in global financial regulatory deliberations. The collapse of FTX, a digital asset exchange based in the Bahamas, illustrated the potential risks associated with firms operating in non-G20 jurisdictions.
He advocated increased engagement and dialogue with these jurisdictions, proposing that the regional consultative groups (RCGs) of the Financial Stability Board could serve as a valuable platform for such discussions.
Although Neiman recognized that the recent financial shocks did not escalate to the extent of the 2008 global financial crisis, he emphasized the significance of sustained reforms and international cooperation to uphold financial stability. He urged regulators and policymakers to seize the moment and extract valuable lessons from these episodes.