FSB Plenary met in Ottawa and discussed financial vulnerabilities and deliverables for the G20 Summit. Among others, the Plenary members discussed the main elements of the FSB work program for 2019 and future years, including potential deliverables to the G20 next year during the Japanese Presidency. The work program will focus on finalizing and implementing post-crisis reforms; monitoring the implementation and evaluating the effects of post-crisis reforms; and addressing new and emerging vulnerabilities in the financial system. A new initiative to be launched in early 2019 and completed in 2020 will involve an evaluation of the to-date effects of the reforms to end too-big-to-fail. FSB will publish an overview of its work program once a final version has been agreed by the Plenary.
Plenary members highlighted that authorities should consider using the current window of opportunity to build resilience, particularly macro-prudential buffers, where appropriate. The Plenary discussed and endorsed the following reports that will be published next month and delivered to the G20 Summit:
- The fourth Annual Report on Implementation and Effects of G20 Financial Regulatory Reforms, which will describe the progress made in implementing post-crisis reforms, the effects of those reforms, and the areas of focus going forward. The report also summarizes the findings of work being done as part of the FSB pivot to evaluate, under the FSB framework agreed in 2017, whether G20 reforms are working as intended to deliver efficient and effective resilience.
- The report on the first evaluation of incentives to centrally clear over-the-counter (OTC) derivatives, which was conducted jointly by FSB and other standard-setting bodies. The relevant SSBs are considering particular standards or policies that may need to be adjusted in response to the findings. For instance, BCBS issued on 18 October a public consultation setting out options for adjusting, or not, the leverage ratio treatment of client cleared derivatives.
- The evaluation on infrastructure finance, which is the first part of a broader evaluation of the effects of reforms on financial intermediation. The report finds that G20 reforms have been of second order relative to other factors. The second part, focusing on the effects on the financing of small and medium-size enterprises, will be the subject of a public consultation to be launched ahead of the June 2019 G20 Summit.
- A progress report on the coordinated action plan to assess and address the risks from the decline in correspondent banking relationships.
- The Cyber Lexicon to support the work of FSB, standard-setting bodies, authorities, and private-sector participants in their work on cyber security.
- A discussion paper setting out considerations for evaluating the adequacy of financial resources for central counterparty (CCP) resolution and the treatment of CCP equity in resolution, which takes forward the final important piece of policy development to address the resilience, recoverability and resolvability of CCPs. FSB will finalize guidance on financial resources in CCP resolution by 2020, drawing on resolution planning by authorities and crisis management groups.
Other key highlights of the meeting are as follows:
- FSB considered a report on member jurisdictions’ actions to remove remaining barriers on trade reporting, following up on the recommendations of a peer review in 2015. The report will be published in November 2018.
- FSB discussed progress by IAIS in developing a holistic framework to assess and mitigate systemic risk in the insurance sector. In November, IAIS will publish a consultation paper on the holistic framework.
- FSB decided to replace the term “shadow banking” with the term “non-bank financial intermediation” in future communications. The new terminology emphasizes the forward-looking aspects of the work of FSB to enhance the resilience of non-bank financial intermediation. FSB plans to publish the 2018 global monitoring report on non-bank financial intermediation at the end of this year.
- Plenary members concluded their review of the FSB processes and transparency and agreed on a set of measures to ensure its continued effective operation and further enhance its focus and ability to promote financial stability. FSB will report further in November on the conclusions of the review, including recommendations for strengthening external outreach.
- Discussion on work of the FSB Task Force on Climate-related Financial Disclosures, which published a status report in September on companies’ adoption of its recommendations and will publish a further status report in June 2019.
Related Link: Meeting Summary
Keywords: International, Banking, Insurance, Securities, PMI, Work Program, Deliverables for G20 Summit, Systemic Risk, FSB
Sam leads the quantitative research team within the CreditEdge™ research group. In this role, he develops novel risk and forecasting solutions for financial institutions while providing thought leadership on related trends in global financial markets.
Previous ArticleOSFI Publishes Mortgage Insurer Capital Adequacy Test Guideline
APRA has concluded its review of the comprehensive plans of authorized deposit-taking institutions for the assessment and management of loans with repayment deferrals.
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.
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.
ECB published a decision allowing the euro area banks under its direct supervision to exclude certain central bank exposures from the leverage ratio.
ESAs launched a survey seeking feedback on the presentational aspects of product templates under the Sustainable Finance Disclosure Regulation (SFDR or Regulation 2019/2088).
ECB published input of the European System of Central Banks (ESCB) into the EBA feasibility report on reducing the reporting burden for banks in EU.
EC adopted a decision determining, for a limited period of time, that the regulatory framework applicable to central counterparties, or CCPs, in the UK and Northern Ireland is equivalent to the requirements laid down in the European Market Infrastructure Regulation (EMIR or Regulation 648/2012).
EBA has decided to phase out the guidelines on legislative and non-legislative moratoria of loan repayments, in accordance with the earlier specified end of September deadline.
EBA published an Opinion addressed to EC to raise awareness about the opportunity to clarify certain issues related to the definition of credit institution in the upcoming review of the Capital Requirements Directive and Regulation (CRD and CRR).
ECB finalized the guide on assessment methodology for the internal model method for calculating exposure to counterparty credit risk (CCR) and the advanced method for own funds requirements for credit valuation adjustment (A-CVA) risk.