In the lead-up to the G20 Summit in Brisbane, it’s important not to forget that there’s still work to be done on several items from the earlier summits. These issues should still play a part in the agenda at the G20 this year.

At first sight, global economic governance is working and the G20 has managed to become its driving force. The London and subsequent G20 meetings led to an impressive re-regulation of the financial sector and to a well-coordinated economic response to the Global Financial Crisis. While the G20 can give well-focused attention on some emerging or new issues, a number of challenges identified at the London meeting of the G20 remain. The priorities for the coming months and years should be finalisation of the last remaining parts of the G20 agenda, most importantly regarding the organisation of the cross-border resolution of large financial institutions and infrastructures; and adequate enforcement of existing agreements across the different financial services sectors.

Cross-Border Resolution Coordination

The global coordination of resolution plans for large financial institutions and infrastructure is the major remaining part of the London G20 agenda. In the EU, significant progress has been realised on the resolution of issues relating to banks. At the global level, resolution relating to infrastructure has been achieved, allowing the Australian Presidency to come to a global agreement for the G20 meeting in Brisbane.

In April 2014, the EU achieved a major breakthrough with the agreement on an EU-wide bank liquidation framework with the Bank Resolution and Recovery Directive (BRRD) and a euro-zone-wide single governance structure for resolving banks in the Single Resolution Mechanism (SRM). With the US, which already had its rules in place as a result of the 2010 Dodd-Frank Act, the two jurisdictions that are home to 22 of the 29 globally-significant banks (G-SIFI’s) have now paved the way for a global agreement on the coordination of resolution. This may seem trivial but to effectively combat those that are ‘too big to fail’, an emergency plan must be in place for large financial institutions. This plan must be based on continuous data-sharing between home and host-country supervisors; the understanding of the components and interconnectedness of the different entities; and the extent to which the situation may be resolved in the case of crisis.

The same applies for international infrastructures for the clearing and settlement of securities and derivatives transactions. The concentrated and global nature of such structures means that, even more so than for banks, their failure would have dramatic consequences; put simply, they are too interconnected to fail. Global agreement is advancing on the core principles of risk management and resolvability of financial crises in the case of distress.

Adequate Enforcement

The G20’s achievements require continuous monitoring to achieve implementation. Under the aegis of the Financial Stability Board a structure has been put in place to ensure continuous follow-up of current agreements. The Annual Leaders Meeting is a valuable opportunity to update the world-at-large on the progress on implementation. There is as yet no reason to sit back and relax. Since there is no global legal authority to monitor compliance the G20 relies upon peer pressure and the effective functioning and acceptance of the organisations in charge.

Peer pressure is already in operation, mainly for the Basel III standards regarding bank capital. The Basel Committee started a Regulatory Consistency Assessment Programme (RCAP) to monitor, assess and evaluate the implementation of the new Basel Standards. The RCAP has an impressive schedule of jurisdictional assessments covering all Basel Committee member jurisdictions for the period 2012-15, with formal publication of the reports (on the Basel Committee’s website) and, if necessary, the option to request for rectification of material gaps. For the four jurisdictions covered so far – Japan, Australia, Singapore and China – the Committee requested rectifications in all cases and up to 90 in China’s case.

The question is whether a similar structure is working for securities markets where the International Organisation of Securities Commissions (IOSCO) is in charge. A key element of the G20 was the obligation relating to central clearing and trading of OTC derivatives transactions. In addition, it was decided that Over-The-Counter (OTC) derivatives contracts should be reported to trade repositories. For the two major derivatives markets in the world, the US and the EU, legislation is in place or almost adopted. IOSCO will need to mirror the efforts undertaken by the Basel Committee to ensure effective compliance.

These efforts will need to be balanced against the emergence of several new issues including, among others, shadow banking, long-term investment, access to finance and the coordination of the end of quantitative easing. The G20 has demonstrated its capacity for sweeping regulatory reforms but effective implementation demands ongoing commitment to the resolution and enforcement mechanisms identified at the London Summit.

Karel Lannoo is Chief Executive Officer for the Centre for European Policy Studies.