Featured Product

    BIS Reports Discuss Policy Issues Facing Financial Sector

    July 06, 2021

    BIS published the annual report and the annual economic report for 2020–21. The annual economic report discusses the near-term challenges of prudential policy and identifies market-based finance as a gap in the macro-prudential framework that needs to be addressed. The report also contains a feature that lays out the design choices for central bank digital currencies. which, alongside cash, would be issued and backed by a central bank. The feature offers an economic analysis of the implications of these digital currencies for consumers, financial institutions, and central banks.

    The annual economic report discusses challenges and limitations of prudential policy, recommending a more balanced policy mix is necessary. Two notable challenges discussed in the report are ensuring that banks are well-capitalized to absorb potential losses and and helping to contain the build-up of financial imbalances, particularly in housing markets. BIS notes that accurate pricing of credit risks is essential, without taking public support of firms for granted. According to BIS, one limitation prudential policy will face is that the current toolkit is not well-suited to addressing the build-up of vulnerabilities among non-bank financial intermediaries, such as asset managers and leveraged funds. It is these players that were at the epicenter of the tremors in March 2020 and among which the most recent signs of stress have emerged. BIS notes that work is underway in the international community to tackle some of the structural vulnerabilities in this area, such as hidden leverage and maturity mismatches. In the near term, the challenge will be to monitor developments closely and to make sure that the core of the financial system, notably banks and central counterparties, remains resilient against possible shocks.

    To tackle the identified challenges, a balanced policy mix is recommended in the annual economic report; this means macro-prudential policies, to strengthen the financial system’s resilience and restrain the financial booms; micro-prudential policies, to strengthen banks so that they can withstand the bust and support credit; and fiscal policies, to act as a backstop in case a financial crisis breaks out and to support the recovery. As per the report, these are the key ingredients of a holistic macro-financial stability framework, better suited to address the nature of today’s business fluctuations. The report points that macro-prudential tools could be especially useful when aimed at the housing market—a market that has been unusually buoyant for recessionary conditions and whose downturns have been a catalyst for major economic weakness on many occasions in the past.

    The annual report highlights the progress made toward delivering the Innovation BIS 2025 strategy and how the BIS has responded over the past year to the unprecedented challenges presented by the COVID-19 pandemic. The BIS Innovation Hub, one of the cornerstones of Innovation BIS 2025, aims to foster innovation and collaboration among the central banking community to enhance understanding of financial technology. This year, BIS launched a strategic partnership in New York. Hub Centers are also slated to open this summer in London and Stockholm, with new Centers in Toronto and Frankfurt/Paris to follow, making the BIS Innovation Hub a global force for innovation. It is noted that suptech applications can improve the content and procedures of regulatory reporting and facilitate the establishment of “datasharing” arrangements between firms and supervisors. Meanwhile, policymakers worldwide are adopting regulatory sandboxes to spur innovation in the financial sector. BIS research provides initial evidence from the United Kingdom on the effectiveness of sandboxes in improving fintech firms’ access to finance. The BIS annual report also notes that, looking ahead at the sustainable development in Asia, there is growing recognition of the significant challenges and opportunities of promoting greening of the economies in the regions. Based on the experience gained with the existing suite of sustainable reserve management products, at their March 2021, the ACC Governors tasked the Asian Office with exploring the development of an Asian Green Bond Fund to help finance investments in green projects, promote green finance, and support the adoption of best market practices and reporting standards to deepen the green bond market in the region. As per a press release from HKMA, Hong Kong welcomed the move from BIS to step up collaboration with central banks in Asia, also emphasizing that the BIS Asian Office in Hong Kong aims to strengthen the BIS's role as a financial service provider to the region's central banks and contribute to high-level policy discussions through research contributions and targeted analytical work to support the evolving needs of central banks in Asia.

     

    Related Links

    Keywords: International, Banking, Annual Report, Annual Economic Report, Innovation Hub, Fintech, CBDC, Regtech, Suptech, Macro-Prudential Policy, Credit Risk, Capital Adequacy, Reporting, NBFI, Non-Bank Financial Intermediaries, Digital Currencies, BIS

    Featured Experts
    Related Articles
    News

    OSFI Discusses Benchmark Rate Transition, Sets Out Work Priorities

    The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.

    May 17, 2022 WebPage Regulatory News
    News

    EBA Proposes Standards to Support Secondary NPL Markets

    The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.

    May 17, 2022 WebPage Regulatory News
    News

    EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution

    The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).

    May 13, 2022 WebPage Regulatory News
    News

    EBA Issues Standards for Crowdfunding Service Providers Under ECSPR

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.

    May 13, 2022 WebPage Regulatory News
    News

    EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution

    The European Securities and Markets Authority (ESMA) published a paper that examines the systemic risk posed by increasing use of cloud services, along with the potential policy options to mitigate this risk.

    May 12, 2022 WebPage Regulatory News
    News

    EC Consults on PSD2 and Open Finance; EU Reaches Agreement on DORA

    The European Commission (EC) published a public consultation on the review of revised payment services directive (PSD2) and open finance.

    May 11, 2022 WebPage Regulatory News
    News

    EC Mandates ESAs to Propose Amendments to SFDR Technical Standards

    The European Commission (EC) has issued two letters mandating the European Supervisory Authorities (ESAs) to jointly propose amendments to the regulatory technical standards under Sustainable Finance Disclosure Regulation or SFDR.

    May 11, 2022 WebPage Regulatory News
    News

    EBA Examines Supervisory Practices, Issues Deposits Reporting Template

    The European Banking Authority (EBA) published its annual report on convergence of supervisory practices for 2021. Additionally, following a request from the European Commission (EC),

    May 11, 2022 WebPage Regulatory News
    News

    SNB Updates NSFR Forms and FINMA Consults on Operational Risk Circular

    The Swiss National Bank (SNB) published Version 1.2 of the reporting forms (NSFR_G and NSFR_P) on the net stable funding ratio (NSFR) of banks, along with the associated documentation.

    May 10, 2022 WebPage Regulatory News
    News

    US Agency Publications Address Basel, Reporting, and CECL Developments

    The Farm Credit Administration published, in the Federal Register, the final rule on implementation of the Current Expected Credit Losses (CECL) methodology for allowances

    May 09, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8191