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IMF Managing Director Christine Lagarde said
banks were holding more capital now than they did in the run-up
to the financial crisis when taxpayers had to shore up the
sector.
"The bad news is that progress is still too slow, and the finish
line is still too far off," Lagarde told a conference on
economic inclusion in London.
While the task of reforming banks is complex, progress is also
being held back by "fierce industry pushback" and fatigue that
is bound to set in at this point in a long race, she said.
"A big gap is that the too-big-to-fail problem has not yet been
solved," Lagarde said, referring to the belief in markets that
governments will still step in to rescue the biggest banks to
avoid the mayhem seen when Lehman Brothers collapsed in 2008.
The IMF estimated that the implicit subsidy or cheaper funding
costs from being too big to fail amounted to about $70 billion
in the United States and up to $300 billion in the euro zone.
Mark Carney, chairman of the Financial Stability Board, a
regulatory task force for the Group of 20 economies (G20), has
said he wants the too-big-to-fail phenomenon "cracked by
Christmas" but faces challenges in Europe and Asia.
Lagarde also called for regulators across the world to agree a
framework for winding down big banks in trouble.
"This is a hole in the financial architecture right now, and it
calls for countries to put the global good of financial
stability ahead of their parochial concerns," Lagarde said.
After the bruising experience of the financial crisis, trust
among international regulators is still not high enough as some
countries continue to take extra initiatives on bank capital to
keep local taxpayers off the hook.
The FSB is worried that such measures, like the Federal
Reserve's plans for extra capital requirements on foreign
lenders in the United States, will split capital markets.
Lagarde said, "We need to be mindful of the risks of fragmenting
the global financial system and hampering the flow of credit to
finance investment."
"But complexity is not an excuse for complacency and delay," she
said.
(Reporting by Huw Jones, editing by Matt Scuffham and Hugh
Lawson)
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