May 04, 2019

FSB published an update on the meeting of its Regional Consultative Group (RCG) for Middle East and North Africa (MENA). The key topics of discussion included the FSB work program for 2019, risks associated with loosening of credit standards and political uncertainties, market fragmentation and its impact on financial stability, reforms to major interest rate benchmarks, financial stability surveillance frameworks, and strengthening the FSB outreach through RCG.

The key highlights of the meeting are as follows: 

  • The RCG members received an update on the FSB work program and deliverables to the June G20 meetings next month in Japan. The FSB work program in 2019 is focused on new and emerging vulnerabilities, including potential financial stability issues arising from market fragmentation and fintech and how these issues may be addressed.
  • Turning to vulnerabilities and regional financial stability issues, meeting participants discussed risks associated with loosening of credit standards and political uncertainties. 
  • Members considered market fragmentation and its impact on financial stability, including inefficiencies, deviations in prices, and pools of liquidity and capital that are unable to move freely in times of stress. The group discussed causes of market fragmentation—such as cross-country differences in information requirements and ring fencing by national authorities—and possible approaches to address it, including considering the fragmentation more systematically as part of implementation monitoring and greater supervisory cooperation.
  • With respect to the major interest rate benchmark reforms, members exchanged experiences on the use of LIBOR in their financial systems and whether financial institutions will be ready for its discontinuation in 2021.
  • The group discussed the financial stability surveillance frameworks to identify, assess, and address new and emerging risks to financial stability. Frameworks used by authorities in Qatar and Morocco served as useful examples.
  • Also discussed were the ways in which the FSB outreach through its RCGs could be strengthened. This may include promoting the continued seniority of representation within the RCGs and encouraging non-FSB members to make contributions and give feedback on the direction of FSB work.

The RCG for the MENA is co-chaired by Murat Çetinkaya, the Governor of the Central Bank of the Republic of Turkey, and Abdulla Saoud Al-Thani, the Governor of the Qatar Central Bank. Membership includes financial and regulatory authorities from Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Morocco, Oman, Qatar, Saudi Arabia, Tunisia, Turkey, and the United Arab Emirates.

 

Related Link: Meeting Update

 

Keywords: International, Middle East and Africa, MENA, Banking, Credit Risk, Financial Stability, Interest Rate Benchmarks, RCG, FSB

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