April 26, 2019

The FSB Plenary met in New York to discuss vulnerabilities in the global financial system and progress under its 2019 work program, including deliverables for the June G20 meetings in Japan. Plenary members note that the core of the financial system is considerably more resilient than it was a decade ago. Although market sentiment has improved since the start of the year and financial conditions have eased, uncertainties remain elevated; however, certain immediate concerns have receded, following the extension to the deadline for the withdrawal of UK from EU.

The key highlights of the meeting are as follows:

  • The Plenary discussed a new initiative to develop an FSB surveillance framework. The new framework will support the comprehensive, methodical, and disciplined review of potential vulnerabilities, and help FSB to identify and address new and emerging risks to financial stability.
  • FSB discussed a draft report that looks at examples of financial activities where supervisory practices and regulatory policies may give rise to market fragmentation and potential trade-offs between the benefits of increased cross-border activity and a need to tailor domestic regulatory frameworks to local conditions and mandates. Examples include the trading and clearing of over-the-counter (OTC) derivatives across borders; banks’ cross-border management of capital and liquidity; and the sharing of data and other information internationally. 
  • The Plenary discussed a report on the implementation of the total-loss absorbing capacity (TLAC) standard. The TLAC standard was developed as part of the FSB work to end the risk of global systemically important banks (G-SIBs) being considered too-big-to-fail. The report will be published in June.
  • The Plenary discussed the draft findings of the evaluation of the effects of financial regulatory reforms on the financing of small and medium-size enterprises. The draft report will be delivered to the G20 meetings in Japan and issued for public consultation in June. The final report, incorporating public feedback, will be published in November. 
  • The Plenary also approved the terms of reference for the evaluation of the effects of too-big-to-fail reforms. The evaluation will assess whether the implemented reforms are reducing the systemic and moral hazard risks associated with systemically important banks. FSB will publish a draft report for public consultation in June 2020 and will publish the final report, taking into account consultation responses, in late 2020.
  • The Plenary discussed the different initiatives under way at standard-setting bodies to address risks from crypto-assets and any possible gaps in this work. The FSB work on crypto-assets has focused on two areas: monitoring of the financial stability implications and a directory of crypto-asset regulators. FSB will publish an update on the work of the standard-setting bodies and will deliver it to the June meeting of G20 Finance Ministers and Central Bank Governors. More generally, FSB is exploring financial stability, regulatory, and governance implications of the decentralized financial technologies. FSB will publish its report to the G20 on this subject in June.
  • FSB agreed, last October, to develop a toolkit of effective practices, which will assist financial institutions as well as supervisors and other relevant authorities in supporting financial institutions, before, during, and after a cyber-incident. The Plenary discussed the draft of an initial progress report, which will be published and submitted to the June meeting of G20 Finance Ministers and Central Bank Governors. The toolkit will be subject to public consultation in early 2020.
  • Plenary members discussed the designation of an entity/entities that will issue Unique Product Identifier (UPI) codes and operate the UPI reference data library, following an assessment process launched in July 2018. The Plenary discussed the draft report of its thematic peer review of FSB member authorities’ implementation of the Legal Entity Identifier (LEI), which will be published in the coming weeks. The report will reaffirm the FSB commitment to a broader use of LEIs globally.
  • The Plenary noted with concern the continued decline in the number of correspondent banking relationships. It discussed a progress report on the implementation of the FSB action plan, including international guidance to clarify regulatory expectations, coordination of technical assistance, and strengthening tools for due diligence. Plenary members reviewed a draft report to the G20 that follows up on the March 2018 recommendations on remittance service providers’ access to banking services.

 

Related Link: Summary of Plenary Meeting

Keywords: International, Banking, Securities, Plenary Meeting, TLAC, Crypto-Assets, Systemic Risk, G-SIBS, Too-Big-To-Fail, LEI, FSB

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