If the government deems a firm not "systemically important, " Mr. Singer forecasts, it could spell its doom.
WSJ: The Weekend Interview with Paul Singer: Mega-Banks and the Next Financial Crisis
It has spread to larger and more systemically important countries such as Spain and Italy and required increasingly bigger policy responses.
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And that has heightened the biggest concern of all: that banks are so systemically important that they cannot be allowed to go under.
In a press release today the regulator detailed capital and liquidity requirements of large bank holding companies and systemically important non-bank financial firms.
The Dodd-Frank Act established a Financial Stability Oversight Council (FSOC), chaired by the secretary of the Treasury, in order to identify systemically important institutions.
As part of any larger reform, the Congress should consider granting the Federal Reserve explicit oversight authority for systemically important payment and settlement systems.
America is now prepared to countenance regulation of systemically important ones.
In part, the fund argues, this was because they were not thought to be systemically important, in the sense that banks were understood to be.
The second stage will deal the most systemically important institutions and how the Fed plans to adapt global banking requirements for them under Basel III.
The one-size-fits all proposal is surprising because the higher capital requirements were sparked by the financial crisis when big, systemically important banks were on the bring of failure.
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During part of his response he spoke about shielding smaller, community banks from some of the more stringent requirements designed to rein in risk-taking at systemically important institutions.
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With ABN Amro still in government hands after it was nationalised in 2009, the nationalisation of SNS Reaal means two of the Netherlands' four systemically important banks are state-owned.
Republicans have justifiably worried that designating any firm as systemically important would encourage markets to assume it is too big to fail, making it cheaper for the firm to borrow.
To curb risks to the financial system, Mr Dodd would create a Financial Stability Oversight Council composed of regulatory chiefs who can designate any big financial firm as systemically important.
Of course, like other central banks, the Federal Reserve continues to monitor systemically important payment and settlement systems and to compare their performance with international standards for reliability, efficiency, and safety.
America's Financial Stability Oversight Council, whose first meeting was due to be held this week, has some very basic questions to answer about what constitutes a systemically important firm, for example.
This is nuts to be identifying systemically important institutions.
WSJ: The Weekend Interview with Paul Singer: Mega-Banks and the Next Financial Crisis
However, a full banking union, in which the eurozone states agree to a common deposit guarantee, with the implied support of the eurozone states for systemically important banks would need a treaty change.
Although the risk from Dubai is not systemically important on a global level, it is significant across the United Arab Emirates and the rest of Gulf Cooperation Council--Saudi Arabia, Bahrain, Kuwait, Oman and Qatar.
The Financial Stability Board released its list of 29 global systemically important financial institutions (SIFI) on Friday, confirming which banks will be required to maintain capital buffers over and above those of smaller competitors under Basel III requirements.
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The problem, in Mr. Singer's view, will be the jarring shift from one day being an investor in a member of the "systemically important" club, to the next day being a creditor whose claim is determined by bureaucratic whim.
WSJ: The Weekend Interview with Paul Singer: Mega-Banks and the Next Financial Crisis
That is nothing new, but there will be some very sizable, systemically important banking institutions that will certainly be protected by all governments in all circumstances, and with that must go a certain extra attention to the supervision of those institutions.
PwC would also know how widespread the practice was amongst some of the systemically important financial institutions, since they also audit Bank of America, JP Morgan Chase, and AIG, as well as the Federal Home Loan Banks and Freddie Mac.
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On Tuesday Mr Geithner told Congress that the AIG mess underlines the need for an expanded resolution authority so that regulators could have the same authority over any systemically important financial institution that is not technically a bank, as was the case with Bear Stearns, Lehman Brothers and AIG.
Can we hold out hope that the new combined public firm, which will be one of the largest high frequency trading, market making, broker dealing firms in the world, will be audited by a group of professionals that can make sure the arguably systemically important new public company has airtight IT?
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The unregulated part of the finance sector will become more important systemically, something the authorities may regret when the next crisis comes along.
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