Structural reform of systematically important financial institutions: the FSB’s response to ‘too big to fail’

Andrew Cornford, Observatoire de la Finance, Geneva

Background

Earlier this summer, on the front of regulatory reform, the principal focus of attention was the progress through the United States Congress of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Amongst the issues widely debated during the deliberations leading to this Act was how to address risks posed by systemically important financial institutions (SIFIs) – those in common parlance ‘too big to fail’. During the same period the Financial Stability Board (FSB) issued a less widely noticed document addressing policy towards SIFIs. This set out a framework that is broadly consistent with the provisions of the Dodd-Frank Act but could eventually justify measures more comprehensive than those contained in the Act (FSB, 2010).