In its semi-annual report on the stability of the global financial system, the International Monetary Fund (IMF) has targeted the largest global financial firms, advising members to eliminate the risks these institutions pose to the system following the most severe financial crisis in decades.
The report comes at a time when IMF members are considering the introduction of stricter regulations for institutions that are ‘too big to fail’, with the international lender highlighting that current proposals are not sufficiently developed to prevent a recurrence of the crisis."We are witnessing a whole range of regulatory proposals that have emerged from the global financial crisis", noted IMF economist Juan Sole. "These are desired moves. However, most of them do not include a more detailed elaboration, that is, specifics about the proposed measures and their implementation", he added. Governments in the U.S. and Europe have been trying to drastically change regulations since the collapse of the American investment bank Lehman Brothers in September 2008.
The IMF also criticizes the establishment of new bodies for monitoring systemic risks that would not have the authority to intervene in the markets. "It is not enough for regulators to simply be instructed to monitor systemic connections; they will also need better instruments to mitigate systemic risks", the report further states. The IMF points to the necessity of introducing new direct measures, such as taxes that would be determined according to the size of the risk that a particular bank poses to the system. It emphasizes the importance of considering the establishment of fees that banks would pay according to the amount of capital that represents a risk to the system, charging taxes in accordance with each bank’s participation in overall systemic risks, and even the possibility of limiting the scale of certain business activities. (H)
