The FSB did acknowledge the load of work on the regulatory agenda and some unwanted side effects – such as a cutback in access to global banking in emerging economies – while still adding new projects.
And nor did it address the criticism of new regulations sometimes working at cross-purposes.
This has been the other challenge of the post-financial crisis regulatory response: progress has certainly been made on structuring a more resilient system but the complexity and load of new regulation creates its own challenges. Particularly if they stymie growth, the primary goal set by the G20.
That's something even other regulators have lamented.
Reserve Bank of Australia governor Glenn Stevens even described the regulatory agenda as a "juggernaut" still growing in strength while Australian Prudential Regulation Authority chairman Wayne Byres noted “settling on a framework that makes sense for Australia while at the same time meeting an evolving international set of standards is going to require a lot of time and effort and attention in the year ahead".
Japanese regulator Nobuchika Mori, commissioner at the Financial Services Agency, was even more pointed at the recent Thomson Reuters Regulatory Summit.
“Today we are joined in a meeting titled 'Regulatory Summit' but there is no summit in sight in the current global regulatory landscape," he lamented.
Mori noted acerbically “financial stability is not a goal in itself. It is a means to ensure sustainable growth".
“However, the factories manufacturing new regulations are still operating at their full capacity," he said. “The production lines of the regulation factories have been significantly expanded after the global financial crisis. The augmented product lines, or expert groups in the international standard setting bodies, produce innumerable and highly technical new regulatory proposals, rendering it difficult for top policy makers to exert proper governance and control."
There is scant acknowledgement of these challenges in the latest FSB report to the G20.
The most substantive piece of work is that designed to address the issue of institutions considered too big to fail. The FSB released its plans for the Total Loss Absorbing Capacity (TLAC) of what are termed “globally systemically important banks" – G-SIBs.
TLAC is comprised of debt and equity and designed, ideally, to constrain risk is such important banks and, if that fails, provide enough real value to wind the bank up without taxpayers needing to cough up.
Critically, the FSB argues the TLAC regime is not costly in terms of allowing banks to thrive and fund growth in the real economy.
“The TLAC requirement is estimated to improve bank resiliency by at least one-third," the FSB said. “Safer G-SIBs reduce the likelihood of the occurrence of systemic crises with their accompanying high costs to economic activity. Additionally, TLAC reduces the fiscal costs of dealing with crises when they do occur.
“In expectation, the overall annual benefits in terms of GDP range between 45 and 60 basis points. These are significantly higher than the costs. The results point to rather contained microeconomic costs for the majority of G-SIBs and, consequently, the very limited macroeconomic costs in terms of downward pressure on GDP from possible increases in credit costs."
The FSB put some numbers behind this assertion: “Depending on the calibration of TLAC requirements, the average annual microeconomic costs to the G-SIBs range from between €400 to €950 million. Given the size of the loan books of these firms, this increase in funding costs can be compensated by increases in lending interest rates of between 5 and 15 basis points (bps) that, in turn, correspond to a drag on annual GDP in the range of 1.9 and 5.3 bps."
This argument has significance well beyond the G-SIBs. Most advanced economies have banks which, while not globally significant, are nationally significant (and hence are called D-SIBs – “domestically significant").
Although there is no mandate to push G-SIB regulation down to a national level, experience has shown national regulators will use the measures as a template.
So it is particularly relevant the FSB assesses the dynamic in terms of higher funding costs leading to an increase in lending rates delivering a drag on GDP. The parameters of which it is comfortable with.
That may be so in isolation and indeed “too big to fail" is the central existential challenge coming out of the financial crisis. But it is the sheer amount and complexity of the other projects and their interaction with one another which remains an unanswered question. The FSB does not attempt a cost benefit analysis of that.
“If dozens of specialised doctors surround a patient and inject different strong medicines for every symptom, what would be the combined effects on the patient?" Mori asked colourfully.
What is increasingly clear as what is becoming known as “Basel IV" - the next “summit" of global regulatory actions – looms, there is considerable variance, even disagreement, between some of the regulators in the major economies.
In general, that is due to the nature of the challenges those regulators face and the experience of their banks in the financial crisis. Indeed, even in financial systems like Australia, the regulatory and supervisory intentions are idiosyncratic.
Mori spoke in terms of the Japanese experience of two decades of economic stagnation despite considerable progress in creating a more resilient banking system.
For Australia, as APRA and the Financial System Inquiry have emphasised, the challenge is that even as Australian banks increase the proportion of funding coming from deposits and longer term debt, they still require short term funding from offshore.
That's where the “unquestionably strong" line from the FSI and others is important. It is not about surviving a domestic crisis, it's about remaining attractive to foreign capital no matter what is going on in Australia or elsewhere in the world.
However for European or British or American or Japanese banks, there are different challenges. In the UK, where taxpayers coughed up billions to buy and support failed banks, the emphasis is on restructuring the industry.
In the US, Federal Reserve chairwoman Janet Yellen made the point a key shortcoming of the US approach was that “we did not focus sufficiently on shared vulnerabilities across firms or the systemic consequences of the distress or failure of the largest, most complex firms".
Hence “too big to fail" and the issue of moral hazard looms larger in the US and Yellen has been unequivocal: banks can either choose to shrink and sell off businesses to avoid being deemed systemically important or they can expect to be much more heavily regulated and wear higher levels of capital and lower leverage.
The challenge though is achieving globally consistent regulation that solves the demands of different nations without putting too much pressure on others and choking off the function of institutions trying to fund the economy.
The letter from FSB chairman and Bank of England governor Mark Carney to the G20 was long on what Mori would call the outputs of the regulation factories but devoted only a few lines to growth: “Durable success will require sustained efforts to implement fully the G20's agreed reforms; to monitor their effects on sustainable growth; to maintain constant vigilance to new and evolving risks, and to deepen the FSB's open and cooperative approach."
It's a long way from mission accomplished.