The Financial Stability Board (FSB) published the new financial stability surveillance framework to support the comprehensive, methodical, and disciplined review of vulnerabilities by FSB. The framework will help to identify and address new and emerging risks to financial stability. The framework provides a global, cross-border, and cross-sectoral perspective on the existing vulnerabilities and draws on the collective perspective of the the broad membership of FSB. It also emphasizes on incorporating multiple perspectives in the assessment of both current and emerging vulnerabilities.
The framework includes a common terminology and taxonomy—which defines key concepts such as vulnerabilities, shocks, and resilience—that will aid shared understanding and consensus building among FSB members. The framework embodies four key principles:
- Focus on vulnerabilities that may have implications for global financial stability. The focus of the framework is to identify vulnerabilities that may have adverse implications for the global financial system and thus for economies. This means that the aim is to identify vulnerabilities that are common to a number of jurisdictions or have the potential to engender material cross-border spillovers.
- Scan vulnerabilities systematically and with a forward-looking perspective, while preserving flexibility. The framework aims to engender a systematic, disciplined review of vulnerabilities. It includes a set of procedures for each vulnerability assessment that helps ensure a comprehensive review of the global financial system. At the same time, the framework promotes a forward-looking approach by clarifying the time horizons over which vulnerabilities might become more material. The framework distinguishes between global vulnerabilities that are already material, those that may become material in the next 2 to 3 years, and those that may become material over a longer horizon.
- Recognize differences among countries. The framework recognizes key ways in which countries’ financial systems, macroeconomic policy frameworks, and institutional structures differ and the implications this may have for the relative importance of vulnerabilities.
- Leverage comparative advantages of FSB while avoiding duplication of work. Many FSB members carry out and publish financial stability assessments. The vulnerability assessments of FSB build on this work, with a focus on issues that are most relevant for global financial stability. In doing so, the assessments aim to reflect the collective views of FSB members on vulnerabilities as well as to leverage the specific expertise and different perspectives of its member institutions.
Once identified, material global vulnerabilities will be subject to more intensive monitoring and analysis and, as appropriate, policy dialog among FSB committees. In addition, FSB will communicate its view on vulnerabilities through its annual reports and other formats.
Keywords: International, Banking, Insurance, Securities, Financial Stability, Financial Stability Surveillance Framework, Vulnerability Assessments, Cross-Border Cooperation, FSB
Previous ArticleHKMA Report Assesses Financial Stability of Banking Sector
The Prudential Regulation Authority (PRA) published the final policy statement PS21/21 on the leverage ratio framework in the UK. PS21/21, which sets out the final policy of both the Financial Policy Committee (FPC) and PRA
The Consumer Financial Protection Bureau (CFPB) proposed to amend Regulation B to implement changes to the Equal Credit Opportunity Act (ECOA) under Section 1071 of the Dodd-Frank Act.
The Prudential Regulation Authority (PRA) decided to maintain, at the 2019 levels, the buffer rates for the Other Systemically Important Institutions (O-SII) for another year, with no new rates to be set until December 2023.
The Financial Stability Board (FSB) published a progress report on implementation of its high-level recommendations for the regulation, supervision, and oversight of global stablecoin arrangements.
In a letter to the authorized deposit taking institutions, the Australian Prudential Regulation Authority (APRA) announced an increase in the minimum interest rate buffer it expects banks to use when assessing the serviceability of home loan applications.
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) are consulting on the preliminary guidance that clarifies that stablecoin arrangements should observe international standards for payment, clearing, and settlement systems.
The European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA) have set out their respective work priorities for 2022.
The Malta Financial Services Authority (MFSA) updated the guidelines on supervisory reporting requirements under the reporting framework 3.0, in addition to the reporting module on leverage under the common reporting (COREP) framework.
The European Commission (EC) published the Implementing Decision 2021/1753 on the equivalence of supervisory and regulatory requirements of certain third countries and territories for the purposes of the treatment of exposures, in accordance with the Capital Requirements Regulation or CRR (575/2013).
EC published the Implementing Regulation 2021/1751, which lays down implementing technical standards on uniform formats and templates for notification of determination of the impracticability of including contractual recognition of write-down and conversion powers.