WASHINGTON A top Treasury official on Monday encouraged global regulators to continue to coordinate and consistently apply tougher rules on financial institutions as they move ahead in finishing postcrisis reforms.
"The task of international coordination is significantly more difficult," Mary Miller, the acting deputy Treasury secretary and undersecretary for domestic finance, said in a speech before the Institute of International Bankers. "However, we all must aim for high regulatory standards that will help mitigate the effects of the next financial crisis."
Since the end of last year, U.S. officials have increasingly been pushing international counterparts to uniformly implement recommendations made by the Basel Committee on Banking Supervision and the Financial Stability Board, warning of the risks of an imbalanced system.
In laying out his 2014 agenda, Treasury Secretary Jack Lew said the focus would be on the completing work internationally to establish home and host authorities to wind down globally active firms, developing a new financial benchmark to replace the London interbank offered rate, and addressing risks tied to short-term wholesale funding and shadow banking.
"We are leaders in the international efforts to develop enhanced measures for all types of financial institutions, and working to align these approaches with the strong U.S. frameworks," Lew said in a Dec. 6 speech. "Our aim is clear: we want a global race to the top."
But while the U.S. has moved faster in many areas of reform, Miller pointed to early progress and expressed optimism on a "shared objective" among global regulators to coordinate in a number of important fronts.
"While the object to a one-size-fits-all approach, they also know that in order to function smoothly global markets require strong global standards," Miller said. "Participation and engagement from all regions is essential to foster the kind of cooperation we need to build a resilient global financial system."
One core piece of a cohesive agenda is imposing a capital surcharge on the world's 29 global systemically important banks, including 8 U.S. institutions. U.S. regulators have yet to release a plan to force the largest banks to hold the extra capital buffer, but have signaled it is coming soon.
"This capital requirement is an essential step in the development of a common supervisory framework for the largest, most interconnected global insurers," Miller said.
Global regulators have also cooperated on reforms tied to the derivatives market. In 2013, the Commodity Futures Trading Commission finalized guidance on how to apply its proposed reforms in cross-border transactions. More recently, the U.S. agency has also been working with the European Commission on a way to raise global standards for electronic trading platforms.
"We understand that derivatives reform to work correctly, they should align globally," Miller said.
Although Miller recognized the need to provide national governments the flexibility in reforming derivatives rules, she stressed the importance of consistency.
"It is vital that the rules are strong enough to achieve desired results and accomplish the overall goals of global standards and creating a level playing field," she said.
Miller also stressed the importance of coordination with global counterparts on developing resolution strategies. The Federal Deposit Insurance Corp. has already signed sharing agreements with the United Kingdom, Canada and China, and is working closely with the Bank of England.
The FDIC has previously conducted "tabletop exercises" to test how orderly liquidation work in the event of a crisis. But Miller encouraged such simulations with global counterparts as well.
Additionally, global regulators have been working to improve oversight of existing interest rate benchmarks, like Libor and others.
"We must make sure that potential alternatives are viable and that we can have a smooth transition," Miller said.