FSB published the third Annual Report on the implementation and effects of the G20 financial regulatory reforms. To further enhance the analysis in future, the report contains a framework for evaluating the effects of reforms. FSB also published a letter from its Chair Mark Carney to G20 Leaders, ahead of the G20 Summit in Hamburg on July 07–08, 2017. In his letter, the FSB Chair summarizes the progress achieved, the work that remains, and the emerging issues that need to be monitored.
The third annual report for G20 Leaders provides a comprehensive assessment on the implementation and effects of the agreed financial regulatory reforms. It contains a table that provides a snapshot of the status of implementation progress by FSB jurisdiction across priority reform areas, based on information collected by FSB and monitoring mechanisms of the standard-setting bodies. The report concludes that implementation progress continues but is uneven across the four core reform areas of building resilient financial institutions, ending too-big-to-fail, making derivatives markets safer, and transforming shadow banking into resilient market-based finance. To date, the evidence on the effects of reforms shows that higher resilience is being achieved without impeding the supply of credit to the economy. The report also includes the findings from assessments undertaken by the FSB in two core reforms (over-the-counter derivatives and shadow banking) and the main elements of the FSB framework for the post-implementation effects of G20 reforms. The report sets out the need for continued support from G20 Leaders to implement fully the agreed reforms. The report includes further analysis on three areas in which authorities need to remain vigilant:
Maintaining an open and integrated financial system
Effects of reforms on emerging market and developing economies
The letter from the FSB Chair highlights that G20 reforms are building a safer, simpler, fairer financial system. A series of measures is eliminating the toxic forms of shadow banking and transforming it into resilient market-based finance. Reforms to the over-the-counter (OTC) derivatives markets are replacing a complex and dangerous web of exposures with a more transparent and robust system. Mr. Carney emphasizes that Basel III must be completed urgently and then implemented faithfully. He added that further work is required to build effective cross-border resolution regimes and to fully realize the benefits of trade reporting in improving transparency in OTC derivatives markets. Moreover, FSB is monitoring financial stability issues raised by fintech and addressing the decline in correspondent banking relationships that can threaten financial inclusion. He concludes that G20 countries now have a strategic opportunity to build on this foundation to create an open, global financial system. Doing so would further support the cross-border investment needed for strong, sustainable, and balanced growth across the G20.
Keywords: International, FSB, Regulatory Reforms, G20, OTC Derivatives, Shadow Banking, Banking, Securities
Previous ArticleESMA Agrees on MiFID II Position Limits Proposed by FCA
The Hong Kong Monetary Authority (HKMA) revised the Supervisory Policy Manual module CG-5 that sets out guidelines on a sound remuneration system for authorized institutions.
The European Banking Authority (EBA) published the final guidelines on the monitoring of the threshold and other procedural aspects on the establishment of intermediate parent undertakings in European Union (EU), as laid down in the Capital Requirements Directive (CRD).
In a recent Market Notice, the Bank of England (BoE) confirmed that green gilts will have equivalent eligibility to existing gilts in its market operations.
The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.
The European Banking Authority (EBA) proposed regulatory technical standards that set out criteria for identifying shadow banking entities for the purpose of reporting large exposures.
The Board of the International Organization of Securities Commissions (IOSCO) proposed a set of recommendations on the environmental, social, and governance (ESG) ratings and data providers.
The European Securities and Markets Authority (ESMA) published recommendations from the Working Group on Euro Risk-Free Rates (RFR) on the switch to risk-free rates in the interdealer market.
The European Central Bank (ECB) published a paper as well as an article in the July Macroprudential Bulletin, both of which offer insights on the assessment of the impact of Basel III finalization package on the euro area.
The International Swaps and Derivatives Association (ISDA) published a paper that explores the impact of the Fundamental Review of the Trading Book (FRTB) on the trading of carbon certificates.
The Prudential Regulation Authority (PRA) published the remuneration policy self-assessment templates and tables on strengthening accountability.