Basel III and FSB Proposals: G-20 Summit Endorses Basel Committee Proposals and Financial Stability Board Recommendations Regarding Systemically Important Financial Institutions

Sullivan & Cromwell LLP - November 15, 2010

At the conclusion of their summit meeting in Seoul, South Korea on November 11, 2010, the Group of Twenty Finance Ministers and Central Bank Governors (the “G-20”) endorsed the Basel Committee on Banking Supervision’s Basel III bank capital and liquidity proposals, including recommended phase-in periods. The G-20 also endorsed the policy framework adopted by the Financial Stability Board (the “FSB”) to address the “moral hazard” posed by systemically important financial institutions (“SIFIs”), including through “a resolution framework…to ensure that all financial institutions can be resolved safely, quickly and without destabilizing the financial system” and a “requirement that SIFIs and initially in particular financial institutions that are globally systemic should have higher loss absorbency capacity…” The materials presented by the Basel Committee and the FSB at the G-20 summit meeting, to the extent made public, and the leaders’ declaration and related materials released at the conclusion of the meeting did not add additional detail or clarity to the many aspects of Basel III still being refined, apart from limited new insights concerning SIFIs.