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G20 regulatory reform body looks at global version of Obama bank limits

Chairman Mario Draghi of the G20's Financial Stability Board says the board is looking at global banking reforms like those announced this week by US President Barack Obama, to avoid the "risks posed by too-big-to-fail institutions".

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AFP - The international Financial Stability Board said Saturday that it was considering banking reforms like those planned by the Obama administration to cut the risks posed by big bank failures.

The FSB, a reinforced body set up by the G20 group of leading economies last year to coordinate regulatory reform in the wake of the financial crisis, said it would publish its full recommendations in October 2010.

In a statement, the body chaired by Italian central bank chief Mario Draghi welcomed the US plans announced on Thursday and criticised by analysts who believe they could damage US finance and global investment.

"The proposals announced by the US are amongst the range of options and approaches under consideration by the Financial Stability Board (FSB) in its work to address the moral hazard risks posed by too-big-to-fail institutions," it said.

The FSB said a mix of approaches would be necessary in different environments to tackle banks which are so big that their failure would jeopardise the economic and financial system.

"At the same time, these approaches must preserve an integrated financial services market" and avoid "an uneven playing field", it said.

The FSB is considering a range of other steps including bolstered capital and liquidity requirements for banks.

It is due to release an interim report after a G20 summit in June in Canada.

President Barack Obama unveiled Thursday plans to limit the size and scope of US banks and finance firms in a bid to rein in "excessive" risk taking.

They include measures to prevent banks or financial institutions from owning, investing in or sponsoring hedge fund or private equity funds.

The FSB brings together national financial watchdogs, regulators and central bank experts from 24 countries as well as international financial institutions.
 

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