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President Calderon Calls for Construction of Solid Global Financial System
 Suzanne Stephens Waller - Presidencia de la República
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June 29, 2010
In Toronto, President declares he will send Congress a bill contemplating a framework for addressing bankruptcy in banks, based on best international practices.
I thank you for the opportunity to share some ideas on regulatory reform, a key issue in strengthening the global financial system.
At the G-20 Summit, held in London last year, when the global financial system was going through a difficult period, we agreed to strengthen the framework for the regulation and supervision of the financial system. A year later, proposals have been elaborated that will enable us to achieve the most important reform of the financial system the world has seen, both because of its depth and its global scope.
Mexico hails the efforts made by the Basle Banking Supervision Committee to create a package of regulatory reforms, and by the Financial Stability Board to reconcile our positions in order to achieve significant agreements.
We therefore agree with Mario Draghi, president of the Financial Stability Board, on the need to establish a stricter definition of capital and liquidity standards, which consider the difficulties for gauging risks more accurately. We must reach an agreement in this issue as soon as possible and ensure a sufficient transition period to prevent collateral effects on global recovery.
Mexico also supports the proposal submitted for addressing problems associated with Systematically Important Financial Institutions (SIFIS), through the establishment of a restricted discretionary frame which establishes regulatory principles and measures that can be adjusted by each country according to its particular circumstances.
In this respect, in Mexico, we consider that the most appropriate set of measures for addressing the problems posed by SIFIS are:
Establishing an institutional framework for addressing the collapse of systemic institutions.
Establishing additional capital charges for activities that generate systemic risks.
Issuing convertible bonds through financial institutions.
Strengthening international coordination among supervisors to obtain timely information and establish strategies for addressing the collapse of these institutions that are present in several countries.
Expanding the scope of regulation to include other organizations, instruments and markets that may create systemic risks.
Designing joint measures to identify non-cooperating jurisdictions and reinforce information exchange.
In the meantime, Mexico has been improving its financial stability with the help of FSB, which has worked to promote cooperation between our supervisors in the financial sector, including the peer review we have established between our countries. Mexico was the first country to be evaluated as part of this exercise, which proved extremely useful in evaluating the regulatory policy decisions we have made.
We have advanced towards the strengthening of the regulatory framework of our financial system:
We moved from a scheme of provisions for financial institutions, based on the concept of observed arrears to one of expected losses.
We have adjusted the definition of capital, meaning that we now have very high quality requirements for capital demand.
We are working on the establishment of a Financial Stability Committee which will enable authorities on the issue to detect systemic risks early and act on them.
We will send Congress a bill contemplating a framework for addressing bankruptcy in banks, based on best international practices.
Within the framework of G-20, we have advanced a great deal in a year and our teams have made an enormous effort, discussing how we can achieve our goals. However, we cannot wait any longer, we must act now. Global financial markets require clear new rules that will eliminate uncertainty and provide a roadmap towards recovery.
Let us redouble our efforts to reach an agreement to regulate markets so that we can reduce the systemic risks for the global financial system and at the same time, promote world economic recovery.
In order to achieve our objectives, all our countries need to make a great effort. That is why, with an enormous will and spirit of collaboration, I invite you to continue working determinedly to jointly construct a solid, lasting and effective global financial system.
Thank you
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