FSB published fifth annual report on the implementation and effects of the G20 financial regulatory reforms. The report includes a color-coded dashboard that summarizes the status of implementation across FSB jurisdictions for priority reform areas. Also published were the annual survey responses by the FSB member jurisdictions on implementation of other areas of reform, along with the summary tables and jurisdiction profiles on implementation progress. Taken together, these reports provide a holistic picture of the implementation of the G20 reforms.
The report, which has been delivered to the G20 meeting this week, concludes that implementation of the reforms called for by the G20 after the global financial crisis is progressing. Large banks are better capitalized, less leveraged, and hold more liquidity. Implementation of the too-big-to-fail reforms is also advancing, including the establishment of effective resolution regimes for banks. The aspects of non-bank financial intermediation that contributed to the financial crisis, including various forms of structured finance, have declined significantly and generally no longer pose financial stability risks. This is contributing to an open and resilient financial system that supports the efficient provision of financing to the real economy. The global financial system has continued to grow and the supply of financial services has become more diversified, partly via the expansion in non-bank financial intermediation and fintech innovations. Yet it is critical to maintain momentum and avoid complacency, to fully achieve the goal of greater resilience as vulnerabilities are evolving.
The report notes that some remaining policy work needs to be completed, particularly for the insurance sector and central counterparties. Despite continued progress, the implementation of reforms is not complete and remains uneven. More work is needed to implement the final Basel III reforms; to operationalize resolution plans for banks and build effective resolution regimes for insurers and central counterparties; and to make OTC derivatives trade reporting more effective;. Work is also needed to further strengthen the non-bank financial intermediation oversight and implement the agreed reforms, including policies to address asset management vulnerabilities. Rapid structural and technological change require continued vigilance to maintain a sound and efficient financial system. FSB continues to monitor and assess the resilience of evolving market structures. These include the resilience of financial markets in stress and the growth of non-bank financial intermediation and cyber risks.
An open and resilient financial system, grounded in agreed international standards, is crucial to support sustainable growth. FSB has identified several areas for further work on approaches and mechanisms to enhance the effectiveness and efficiency of international cooperation and to help mitigate any negative effects of market fragmentation on financial stability. The report in particular recommends that:
- Regulatory and supervisory bodies should lead by example in promoting the timely, full, and consistent implementation of the remaining reforms. This will support a level playing field and avoid regulatory arbitrage.
- Frameworks for cross-border cooperation between authorities should also be enhanced to build trust, allow sharing of information, and preserve an open and integrated global financial system.
- Authorities should evaluate whether the reforms are achieving their intended outcomes, identify any material unintended consequences, and address these consequences without compromising on the objectives of the reforms.
- Financial stability authorities should continue to contribute to the monitoring of emerging risks and stand ready to act if such risks materialize.
Keywords: International, Banking, Insurance, Securities, G20, Basel III, OTC Derivatives, CCPs, Fintech, Regulatory Reforms, Too Big to Fail, Financial Intermediation, FSB
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EC published, in the Official Journal of the European Union, a notification that the European Court of Auditors (ECA) has published a special report on resolution planning in the Single Resolution Mechanism.
BoE published a scenario against which it will be stress testing banks in 2021, in addition to setting out the key elements of the 2021 stress test, guidance on the 2021 stress test, and the variable paths for the 2021 stress test.
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FSB published the work program for 2021, which reflects a strategic shift in priorities in the COVID-19 environment.
FCA announced that 50% firms have started using the new data collection platform RegData, which is slated to replace the existing platform known Gabriel.
Bundesbank published Version 5.0 of the derivation rules for completeness check at the form level, with respect to the data quality of the European harmonized reporting system.
FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.
ECB published results of the quarterly lending survey conducted on 143 banks in the euro area.
ESAs published the final draft implementing technical standards on reporting of intra-group transactions and risk concentration of financial conglomerates subject to the supplementary supervision in EU.