FSB published a letter from the FSB Chair Mark Carney to G20 Leaders, ahead of their Summit in Buenos Aires. The letter focuses on the progress made during 2018 and highlights the main issues that require the attention of G20 Leaders. It emphasizes 2018 as a year of transitions that are taking place against a backdrop of important structural changes in the financial system, with fast-growing sectors such as fintech and non-bank finance bringing the welcomed diversity while also creating potential vulnerabilities.
The letter states that after a decade delivering the ambitious reforms of the G20 to address the fault lines that caused the global financial crisis, FSB is pivoting to focus on implementing those reforms, evaluating their effectiveness, and adjusting them, where necessary. In parallel, new policies are being developed to address new risks to financial stability. A world in transition will not only test the resilience of the global financial system but it will also present a major strategic opportunity for the G20. The letter reports on the FSB delivery against the four priorities for this year:
- Addressing emerging vulnerabilities while harnessing the benefits of innovation. The letter highlights the importance of continued vigilance to contain the risks of non-bank finance, including implementing the FSB recommendations to address structural vulnerabilities associated with asset management, the publication of a cyber lexicon, and new work to develop effective practices for financial institutions’ responses to, and recovery from, major cyber incidents.
- Disciplined completion and implementation of the G20 reform program. The G20 post-crisis reforms have delivered a safer, simpler, and fairer financial system. To reinforce this progress, FSB is working with standard-setters to complete work on a few final policy areas and focus on the implementation of the agreed financial reforms. Priorities include full, timely, and consistent implementation of Basel III; finalizing policy to deliver resilient, recoverable, and resolvable central counterparties; and work by the IAIS to deliver a new framework for addressing systemic risks in insurance sector. The letter also highlights deliverables, including completing a toolkit of measures to address the underlying causes of misconduct; maintaining an open and inclusive financial system through the Correspondent Banking Action Plan; and encouraging progress in mitigating the financial stability risks from climate change through the taskforce on climate-related financial disclosures.
- Pivoting from new policy development to ensuring that reforms are operating as effectively and efficiently as possible. As its work to fix the fault lines that caused the financial crisis draws to a close, FSB aims to assess whether reforms are operating as intended and to identify and deliver adjustments where appropriate, without compromising on the agreed level of resilience. To this end, FSB delivered to the G20 Leaders Summit the first two evaluations of reforms, on the effects on infrastructure finance and on incentives to centrally clear over-the-counter (OTC) derivatives.
- Optimizing how the FSB works. A decade ago, the G20 created FSB to identify and address vulnerabilities that could threaten the stability of the global financial system. FSB’s strength results from its multidisciplinary, consensus-based, and member-driven approach. To make sure FSB is fit for the next phase, FSB has reviewed how it works and will take a number of steps to improve process and transparency, including an enhanced approach to prioritization of work focused on promoting financial stability and outreach with external stakeholders.
Finally, the letter notes that having built a safer, simpler, and fairer financial system, the G20 and FSB bear heavy responsibilities to safeguard recent progress, address new risks, and seize new opportunities presented by the major transitions underway in the global economy and financial system.
Keywords: International, Banking, Insurance, Securities, Basel III, G20, Financial Stability, Post-crisis Reforms, FSB
Previous ArticleFSB Reviews Processes and Transparency to Optimize Its Effectiveness
PRA published a statement that explains when to expect further information on the PRA approach to transposing the Capital Requirements Directive (CRD5), including its approach to revisions to the definition of capital for Pillar 2A.
SRB published the work program for 2021-2023, setting out a roadmap to further operationalize the Single Resolution Fund and to achieve robust resolvability of banks under its remit over the next three years.
EIOPA is consulting on the relevant ratios to be mandatorily disclosed by insurers and reinsurers falling within the scope of the Non-Financial Reporting Directive as well as on the methodologies to build these ratios.
US Agencies (FDIC, FED, and OCC) issued a joint statement encouraging banks to cease entering into new contracts that use USD LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021, to facilitate an orderly LIBOR transition.
The Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS, endorsed a coordinated approach to mitigate COVID-19 risks to the global banking system.
HM Treasury extended the consultation period on Phase II of the Future Regulatory Framework (FRF) Review, from January 19, 2021 to February 19, 2021.
ECB finalized guidance on the way it expects banks to prudently manage and transparently disclose climate and other environmental risks under the current prudential rules.
BCBS published a technical amendment to the capital treatment of securitizations of non-performing loans by banks.
PRA published the policy statement PS23/20 on the calculation of stressed value at risk (sVAR) and risks not in value at risk (RNIV) under the market risk framework.
BoE announced that the Data and Statistics Division is planning to move collection of statistical data to the BoE Electronic Data Submission (BEEDS) portal.