June 25, 2019

FSB published the letter to G20 Leaders and the opening statement from an FSB briefing by the FSB Chair Randal K. Quarles. The letter, which the FSB Chair sent to G20 Leaders ahead of the Summit in Osaka on June 28-29, 2019, sets out progress by FSB over the past year in enhancing global financial stability and furthering the goals of G20. The key themes covered in the letter relate to the focus on new and emerging vulnerabilities, monitoring of risks resulting from financial innovation, and review of the implementation of regulatory reforms.

The letter states that there has been remarkable progress in building a more resilient global financial system. However, promoting global financial stability is a continuous task that requires vigilance to the emerging risks. Annex to the letter contains status of implementation of reforms in priority areas by FSB jurisdictions (as of June 2019). The following are the key highlights of the letter:

  • Addressing new and emerging vulnerabilities—FSB will remain vigilant in identifying emerging risks, including increase in level of corporate and public debt. FSB is closely monitoring leveraged loan and collateralized loan obligation markets to obtain a fuller picture of the pattern of exposures to these assets globally.
  • Harnessing the benefits of financial innovation while containing risks—A deep and early understanding of how technological innovation may transform financial institutions and markets is the key to harness benefits while containing risks. One such example is crypto-assets. FSB and standard-setting bodies will monitor risks very closely and in a coordinated fashion, and consider additional multilateral responses as needed.
  • Completing implementation of the agreed reforms and ensuring that the reforms work as intended—FSB assessment highlights that, despite continued progress, implementation is not complete and remains uneven across reform areas. G20 Leaders’ continued support in implementing the agreed reforms is needed. Finalizing post-crisis reforms and monitoring their effective implementation remains a focus of FSB work.
  • Promoting an integrated global financial system—An open and resilient financial system, grounded in agreed international standards, is crucial to support sustainable growth. Introduction of the global Legal Entity Identifier (LEI) is a concrete step toward promoting integrated markets. 1.4 million entities are now identified by an LEI in more than 200 countries, though LEI still has far to go to meet the G20 objective of a truly global LEI adoption and FSB has published recommendations to deliver on this fundamental post-crisis reform.
  • Strengthening FSB’s outreach and accountability— Reaching out beyond its membership is key for FSB to achieve its mandate of promoting global financial stability. FSB is taking steps to improve communication and transparency, to facilitate wider input to its work, and to increase understanding of what it does.

In 2019, FSB deliverables align with the G20 Presidency’s priorities and demonstrate their refocused mission, including increased attention to new vulnerabilities specifically in areas where technological innovations are playing an increasing role in financial services and are bringing new challenges to the global regulatory community. In conclusion of the letter, Mr. Quarles asked for G20 Leaders’ continued support, both to complete implementation of the agreed reforms and to cooperate to identify and, where identified, address new vulnerabilities.

 

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Keywords: International, Banking, Securities, Financial Stability, Accountability, Fintech, Regulatory Reforms, LEI, FSB

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