Financial regulators, policymakers, academic researchers, private sector professionals, and IMF/World Bank country delegates gathered on April 17, 2012 to discuss the future of financial regulation. The roundtable, co-hosted by the Center for Financial Policy at the University of Maryland’s Robert H. Smith School of Business and the Monetary and Capital Markets Department of the International Monetary Fund (IMF), preceded the IMF-World Bank Spring Meetings in Washington, DC.
Christine Lagarde, Managing Director of the International Monetary Fund, opened the roundtable with a discussion of the relationship between financial regulation and growth and stability around the world. Ms. Lagarde spoke passionately about financial regulation and the important need for it to be on the agenda. “We need a more stable financial system, one that serves businesses and households rather than destabilizes the functioning of the real economy,” she said to the event guests. Although some progress has been made on capital and liquidity standards, Ms. Lagarde noted that “[policymakers] still need to complete the reform agenda and ensure that the new standards are implemented in a way that is consistent across countries.” José Viñals, Director of the IMF’s Monetary and Capital Markets Department, followed the Managing Director’s remarks by addressing the role IMF can play in financial regulation.
The first panel, “Framework and Best Practices,” was moderated by Jonathan Fiechter, Deputy Director of the Monetary and Capital Markets Department at the IMF. The panel discussed the progress national and international policymakers made in addressing the causes of the financial crisis since 2007. Additionally, they discussed ‘Too Big To Fail’ institutions, resolution frameworks, macro-prudential supervision and risks associated with shadow banking. Panelists included Nellie Liang, Director, Office of Financial Stability Policy and Research, Federal Reserve Board; Jason Cave, Deputy Director, Office of Complex Financial Institutions, FDIC; Russ Wermers, Associate Professor of Finance, University of Maryland; and Stijn Claessens, Assistant Director, Research, IMF.
Lemma Senbet, The William E. Mayer Chair Professor of Finance and Director, Center for Financial Policy, University of Maryland, moderated the second panel, “The Future of Financial Regulation.” The panel first discussed the movement towards a globally coordinated regulatory framework to monitor systemically important institutions that operate across national boundaries. Other topics included financial innovation; Dodd-Frank’s Orderly Liquidation Authority; regulating and monitoring systemic risks engendered by ETFs; corporate governance and executive compensation practices; and the future of capital regulation and cost of bank equity. Panelists included Donald Kohn, Former Vice Chairman, Federal Reserve Board and Senior Fellow, Brookings Institution; Craig Lewis, Chief Economist and Director, Division of Risk, Strategy, and Financial Innovation (RiskFin), US Securities and Exchange Commission; Charles Taylor, Deputy Comptroller for Capital and Regulatory Policy, Office of the Comptroller of the Currency; and Kathleen Hanley, Deputy Director and Deputy Chief Economist, Division of Risk, Strategy, and Financial Innovation (RiskFin), US Securities and Exchange Commission.
The roundtable participants enjoyed a luncheon keynote address from Darrell Duffie, Dean Witter Distinguished Professor of Finance at Stanford University. Professor Duffie went into the “plumbing” of the financial market, discussing the core interbank market, central bank liquidity, central bank swap lines, broad credit facilities, liquidity to financial market utilities, lending of last resort, and Tri-Party Repo Infrastructure Reform. Amadou N.R. Sy, Deputy Chief of the Monetary and Capital Markets Department at the IMF, concluded the day’s event by encouraging participants to use the information obtained at the roundtable to help refine the agenda on financial regulation in a forward looking manner. He also mentioned that the program coordinators will produce a white paper as a follow-up to this roundtable.
About the Center for Financial Policy
The Center for Financial Policy leverages the Smith School’s world renowned faculty to lead research in a collaborative exchange of ideas and solutions on critical policy issues between business, government, and academia, while working to enhance and broaden the exposure of the next generation of business and government leaders to leading academics and practitioners in financial policy. For more on the center, please visit the CFP website.
About the Monetary and Capital Markets (MCM) Department of the International Monetary Fund
MCM’s mission is to provide intellectual leadership and expertise for the IMF’s work on capital markets, financial sectors and monetary and foreign exchange arrangements and operations. MCM’s surveillance role includes: identifying risks to global financial stability and their implications for the membership; assessing the soundness of individual members’ financial systems and their linkages with the macro-economy; assessing the effectiveness of the authorities’ oversight of these systems; and strengthening the Fund’s capability to provide early warning and help prevent or mitigate financial crises. MCM supports capacity-building in member countries, particularly with regard to the supervision and regulation of financial systems, central banking, monetary and exchange rate regimes, and asset and liability management. In delivering these services, MCM collaborates closely with regional and multilateral organizations and financial sector standards-setters.