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February 10, 2019

While speaking at the BIS Special Governors Meeting in Hong Kong, Randal K. Quarles, the Chair of FSB and Vice Chair of FED, discussed his views on how the work of FSB must evolve and the key principles that, he believes, should inform that work. He mentioned the considerable contribution of FSB toward the post-crisis Basel III reforms and highlighted that FSB is addressing risks from non-bank financial intermediation through greater monitoring and policy measures.

Next, he moved on to outline the few core principles that should guide the FSB work going forward:

  • Improve outreach and transparency—including to the membership, other global authorities, the public, and key stakeholders
  • Ensure that the assessment of vulnerabilities is based on cutting-edge thinking and a disciplined methodology
  • Work toward continual, critical analysis of the effects of regulation, with an eye to making useful improvements where possible

FSB Chair discussed the role, worldwide representation, and effectiveness of the six Regional Consultative Groups (RCGs) of FSB that bring together FSB members with about 70 additional jurisdictions (in addition to the already existing 24 FSB member jurisdictions). He announced that, for the first time in the FSB history, FSB will shortly publish its work program to the public, to provide full picture of the issues that plan to be investigated over the coming year. To further improve outreach, he announced that the FSB public consultation period will now be at least 60 days, as opposed the earlier short consultation timelines that limit the ability for true exchange. He added that FSB has decided to undertake a review of its framework for assessing vulnerabilities to ensure that FSB is at the cutting edge of financial stability vulnerability assessment. This work will be undertaken by a committee charged with assessing vulnerabilities under the leadership of FSB Vice Chair Klaas Knot of the Dutch National Bank (De Nederlandsche Bank). This should be a framework that starts from first principles and benefits from substantial dialog with nonbanks as well as banks, regulators, and other relevant official bodies.

With respect to the evaluation of the post-crisis reforms, Mr. Quarles emphasized that one public measure of whether the review process is effective will be whether FSB recommends any improvements or revisions on the basis of the review. In any system as complex and consequential as the body of post-crisis financial regulations, there will always be aspects—and sometimes material aspects—that can be improved on the basis of experience and analysis. A credible review process that is both rigorous and dispassionate will find a few improvements. He then mentioned that FSB is engaged in work examining the effects of reforms on the financing of small and medium enterprises, which are the lifeblood of many economies worldwide. FSB will consult publicly on the findings of this evaluation in June, ahead of the G20 Summit in Osaka. He also informed that FSB is in the process of launching an important study on the effects of reforms aimed at ending too-big-to-fail. This evaluation is being led by Claudia Buch, vice president of the Deutsche Bundesbank.

 

Related Link: Speech

Keywords: International, US, Banking, Insurance, Securities, Randal Quarles, Post Crisis Reforms, NBFI, Work Program, FSB, BIS

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