U.S., Australia Welcome ‘Too-Big-to-Fail’ Banks Progress

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The United States and Australia said Friday they were encouraged by progress on rules to reduce the problem of “too-big-to-fail” banks as part of efforts to improve stability after the global financial crisis.

U.S. Treasury Secretary Jack Lew welcomed the “emerging consensus” on discussions at the international watchdog, the Financial Stability Board, over capital buffers for the world’s biggest banks.

“I welcome the progress made by the Financial Stability Board over the past few days and the emerging consensus on the total loss absorbing capacity proposal, which now positions us to deliver on the Brisbane summit commitment,” Lew said.

“This important standard will help facilitate the early resolution of systemically important banks and will protect taxpayers from bearing the burden of any global bank’s failure.”

Australian Treasurer Joe Hockey said there was a “real chance” of breakthroughs in the Group of 20 developed and emerging nations’ discussions this weekend in the northern Australian city of Cairns.

“The work of the FSB here over the last few days has been very encouraging,” Hockey said at a joint press conference with Lew.

“There’s a very real chance that we can have some very good breakthroughs by the end of the weekend.”

The Financial Stability Board, which was established after the global economic crisis and comprises of central bankers and regulators from 24 countries, met on Wednesday and Thursday in Cairns ahead of the G20 meeting.

The watchdog said Thursday that it had made “substantial progress in defining the terms and conditions” for tackling the impact of “too-big-to-fail” banks.

The total loss absorbing capacity plan aims to set global standards on the capital buffers needed by large banks, to help shield taxpayers and the financial system should they falter.

The proposal is part of a suite of bank reform measures being discussed following the collapse of Lehman Brothers in 2008, which shook the financial sector and brought down the U.S. economy.

The two-day G20 meeting in Cairns begins on Saturday.

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