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Regulators still calling the shots

If systemic risk in the banking system really has been reduced as much as chief executives say, why are regulators set to have an even greater impact in 2015?

banks next big hits

Listen to the honeyed words of Jamie Dimon, chief executive of JPMorgan, or Mark Carney, chairman of the Financial Stability Board, and you might be forgiven for thinking that we are coming to the end of the regulatory efforts to make the banking system safer that followed the financial crisis of 2008.

Banks have multiple times the quantity and quality both of capital and liquidity they did before the crisis, says Dimon. And this is clearly true. They are much more transparent in their reporting – to regulators at least, he adds. Dimon says that a large bank could now fail “and regulators would have the capital, the know-how and the capability to unwind it in a way that doesn’t damage the global economy”.

If this starts to sound like wishful thinking, he’s not the only one indulging in it. Carney told G20 leaders attending the Brisbane summit last November that “the job of agreeing measures to fix the fault lines that caused the crisis is now substantially complete”, and added that those leaders’ endorsement of the FSB’s proposals, notably new requirements for the largest banks’ total loss absorbing capacity (TLAC), would be “a watershed” in ending the problem of too big to fail.

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