FSB published the annual report that examines the implementation progress and the impact of G20 financial regulatory reforms across jurisdictions. The report includes an implementation dashboard that summarizes the status of implementation across FSB jurisdictions for priority reform areas. It also contains a table that shows the changes in implementation status by FSB jurisdiction across priority areas since September 2019. Overall, the report finds that the G20 reforms after the 2008 financial crisis have served the financial system well during the COVID-19 pandemic. Greater resilience of major banks at the core of the financial system, combined with the bold and decisive actions by authorities, has helped to sustain the supply of credit to the real economy and to maintain global financial stability. However, given the pandemic, there has been limited additional progress in implementing the G20 reforms during the last year.
Acknowledging the extraordinary circumstances, FSB and the standard-setting bodies have extended implementation deadlines for certain international reforms to provide additional capacity for firms and authorities to respond to the COVID-19 shock. The report highlights that regulatory adoption of several core Basel III elements has generally been timely to date, although there have been delays in implementing other Basel III standards. Implementation of over-the-counter (OTC) derivatives reforms is also well-advanced. Furthermore, work is progressing to develop a global insurance capital standard. IAIS is developing a global risk-based Insurance Capital Standard (ICS) for internationally active insurance groups. In November 2019, the IAIS Executive Committee agreed on ICS version 2.0, which will be used for confidential reporting to supervisory colleges in a five-year monitoring period. However, substantial work remains to operationalize resolution plans for systemically important banks and to implement effective resolution regimes for insurers and central counterparties. Work is also ongoing at the international level to enhance central counterparty resilience, recovery, and resolution and to make trade reporting truly effective. The implementation of non-bank financial intermediation reforms continues but it is at an earlier stage than other reforms.
The pandemic represents the first major global test of the post-crisis financial system and an opportunity to examine whether reforms have worked as intended. The pandemic not only provides an opportunity to assess the effectiveness of the reforms but also underscores the importance of global regulatory cooperation with G20 support. FSB and the standard-setting bodies will carry out further work to identify potential lessons learned for international standards. The question of whether the flexibility provided by authorities is actually used by financial institutions may require particular attention and will inform discussions of future policy adjustments, including on the eventual exit from temporary measures. The extraordinary central bank interventions and policy measures taken in response to the financial market turmoil in March, however, raise issues for further consideration including on their longer-term consequences. More work is needed to assess interconnections in the global financial system, the nature of vulnerabilities in non-bank financial intermediation in relation to the liquidity stress, and how central bank liquidity facilities have affected market conditions and market participant expectations. FSB and the standard-setting bodies will continue to promote approaches to deepen international cooperation, coordination, and information-sharing, underpinned by the FSB principles for the COVID-19 response, with the support of the G20.
Keywords: International, Banking, Insurance, Securities, Basel, ICS Version 2, Derivatives, COVID-19, Financial Stability, G20, FSB
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Previous ArticleEBA Publishes Methodology and Draft Templates for 2021 Stress Tests
EBA published a report analyzing the impact of the unwind mechanism of the liquidity coverage ratio (LCR) for a sample of European banks over a three-year period, from the end of 2016 to the first quarter of 2020.
In response to questions from a member of the European Parliament, the ECB President Christine Lagarde issued a letter clarifying the possibility of amending the AnaCredit Regulation and making targeted longer-term refinancing operations (TLTROs) dependent on the climate-related impact of bank loans.
IASB started the post-implementation review of the classification and measurement requirements in IFRS 9 on financial instruments and added the review as a project to its work plan.
FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions.
EBA published a report on the benchmarking of national loan enforcement frameworks across 27 EU member states, in response to the call for advice from EC.
FSB published a letter from its Chair Randal K. Quarles, along with two reports exploring various aspects of the market turmoil resulting from the COVID-19 event.
RBNZ launched a consultation on the details for implementing the final Capital Review decisions announced in December 2019.
The Trustees of the IFRS Foundation, which are responsible for the governance and oversight of IASB, have announced the appointment of Dr. Andreas Barckow as the IASB Chair, effective July 2021.
HKMA issued a letter to consult the banking industry on a full set of proposed draft amendments to the Banking (Capital) Rules for implementing the Basel standard on capital requirements for banks’ equity investments in funds in Hong Kong.
ESRB published an opinion assessing the decision of Swedish Financial Supervisory Authority (FSA) to extend the application period of a stricter measure for residential mortgage lending, in accordance with Article 458 of the Capital Requirements Regulation (CRR).