Featured Product

    FSB to Address Too-Big-to-Fail, Shadow Banking, and Fintech Risks

    March 28, 2019

    Randal K. Quarles, Vice Chair for Supervision of FED and Chair of FSB, spoke at a conference on financial intermediation, regulation, and economic policy, which was hosted by ECB and Journal of Money, Credit and Banking in Frankfurt. He shared his views on the way the work of FSB must evolve and outlined the core principles that, he believes, should inform that work. These core principles, according to Mr. Quarles, are engagement, rigor, and analysis. He also discussed the work priorities of FSB for 2019 and beyond, including non-bank financing, fintech, and evaluation of the too-big-to-fail reforms.

    The first prominent issue on the FSB agenda in 2019 is fintech, said Mr. Quarles. FSB monitors and analyzes the financial stability implications of financial innovation as part of its mandate to identify and address vulnerabilities in the global financial system. Two areas that FSB has started to examine in greater detail include the potential effects from the entry of large technology firms into financial services and the potential effects from the growth in decentralized financial technologies. Both the potential entry of large, established technology companies into financial services and the ability of technology to decentralize financial transactions raise a number of issues, some of which may touch on financial stability. FSB will address the issues with discipline and analytical rigor in a way that incorporates the views of the public and key stakeholders and that results in answers that are practical and intelligible.

    He then highlighted that the nonbank financial intermediation (or shadow banking) has been a source of systemic risk and that it has grown relatively rapidly since the global crisis, in both its absolute size and its relative importance in intermediating credit. Consequently, developments in this area need to be monitored closely. To this end, FSB produces an annual report that outlines the developments in non-bank financing, including global trends and potential risks. FSB promotes the resilience of non-banks through the development of a range of policies to address systemic vulnerabilities as they arise, while not impeding the growth of sustainable non-bank financing models. He then added that it is imperative to start analyzing the effectiveness of the policies that have been implemented.

    Finally, Mr. Quarles discussed the past and upcoming work of FSB to address the issue of “too-big-to-fail.” To address this challenge, FSB and other global standard-setters developed a framework and a set of policy measures intended to reduce the moral hazard risks posed by systemically important financial institutions. He highlighted that the total loss-absorbing capacity (TLAC) standard is a key element of the policy measures of FSB to address too-big-to-fail. Under this standard, FSB has introduced a bail-in (in contrast to a bail-out) strategy that necessarily employs a gone concern or post-failure loss-absorbing and recapitalization capacity for the set of global systemically important banks or G-SIBs. To assess the effectiveness of these measures, he added that FSB is launching an evaluation of the effects of the too-big-to-fail reforms. FSB plans to draw extensively on academic advisers during all phases of the work in this area and encourages other experts in this field to look closely to the consultative document that will be coming from the study next year. FSB  welcomes inputs as it undertakes the study of this signature issue from the crisis.

    The FSB Chair concluded that "moving forward there will surely be additional issues to address and areas to examine." During his time as the FSB Chair, he hopes to make progress not only on the areas he has outlined but also on a range of additional forward-looking issues.

     

    Related Links

    Keywords: International, Banking, Securities, Fintech, Too-big-to-fail, Systemic Risk, TLAC, G-SIB, Shadow Banking, FSB

    Featured Experts
    Related Articles
    News

    APRA Updates Validation and Derivation Rules in September 2020

    APRA updated the lists of the Direct to APRA (D2A) validation and derivation rules for authorized deposit-taking institutions, insurers, and superannuation entities.

    September 24, 2020 WebPage Regulatory News
    News

    EC Proposes Frameworks for Crypto-Assets and Operational Resilience

    EC adopted a package that includes the digital finance and retail payments strategies and the legislative proposals for regulatory frameworks on crypto-assets and digital operational resilience.

    September 24, 2020 WebPage Regulatory News
    News

    ECB Publishes Opinion on Proposals to Amend Securitization Framework

    ECB published an opinion (CON/2020/22) on proposals for regulations amending the securitization framework of EU, in response to the COVID-19 pandemic.

    September 24, 2020 WebPage Regulatory News
    News

    FCA Consults on Regulation of International Firms in UK

    FCA is consulting on its approach to the authorization and supervision of international firms operating in UK.

    September 23, 2020 WebPage Regulatory News
    News

    MAS Amends Notice on Capital Adequacy Requirements of Banks

    MAS published amendments to Notice 637 on the risk-based capital adequacy requirements for reporting banks incorporated in Singapore.

    September 23, 2020 WebPage Regulatory News
    News

    FCA to Begin to Move Firms to New Data Collection Platform RegData

    FCA announced that it will move firms to RegData from Gabriel in the coming months in stages, based on the reporting requirements of firms.

    September 23, 2020 WebPage Regulatory News
    News

    ISDA Expects IBOR Fallbacks to be Effective by End of January 2021

    ISDA issued a letter to regulators to flag that it now expects the supplement to the 2006 ISDA Definitions and the Interbank Offered Rate (IBOR) Fallbacks Protocol to be effective around mid- to late-January 2021.

    September 23, 2020 WebPage Regulatory News
    News

    APRA Reviews Repayment Deferral Plans, Identifies Best Practices

    APRA has concluded its review of the comprehensive plans of authorized deposit-taking institutions for the assessment and management of loans with repayment deferrals.

    September 22, 2020 WebPage Regulatory News
    News

    ESAs Assess Risks to Financial Sector After COVID-19 Outbreak

    ESAs (EBA, EIOPA, and ESMA) published the first joint report that assesses risks in the financial sector since the outbreak of the COVID-19 pandemic.

    September 22, 2020 WebPage Regulatory News
    News

    BoE Confirms Withdrawal of COVID Corporate Financing Facility

    BoE and HM Treasury confirmed that the COVID Corporate Financing Facility (CCFF) will close for new purchases of commercial paper, with effect from March 23, 2021.

    September 22, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5836