FSB published an update on its work to address market fragmentation. FSB is working in this area in collaboration with the other standard-setting bodies. The key focus areas of work involve mitigation of unintended regulation-driven fragmentation, pre-positioning of capital and liquidity, regulatory and supervisory coordination and information-sharing, and the evaluation of "too-big-to-fail” (TBTF) reforms. The update was delivered to G20 Finance Ministers and Central Bank Governors ahead of their meeting in October 2020.
The following are the key highlights of the progress and the upcoming work on market fragmentation:
- IOSCO published a report on good practices on processes for deference in June 2020, with the aim of helping authorities to mitigate the risk of unintended, regulatory-driven, fragmentation in wholesale securities and derivatives markets. IOSCO will now turn its attention more specifically to another cornerstone of deference, namely supervisory cooperation. IOSCO will explore how the use of Memoranda of Understanding have evolved in recent years and what further developments could be undertaken to improve the quality, scope, and timeliness of the information a regulator is likely to receive from other jurisdictions. IOSCO will also explore whether and how existing supervisory colleges currently achieve their stated goals and, if appropriate, identify ways to increase their use in other areas of securities and derivatives markets.
- FSB members continue to work on the distribution of resources in global systemically important banks with regard to the need to achieve a balance between certainty for host jurisdictions and the flexibility to deploy resources where needed in a group in times of stress. FSB is also working on identifying ways to further promote effective cooperation and coordination in crisis times.
- Regulatory and supervisory coordination and information-sharing have focused on policy measures taken in response to the COVID-19 pandemic. FSB has established a repository of regulatory and supervisory policy measures, in its member jurisdictions, in response to the COVID-19 pandemic. FSB continues to work on identifying whether differences in the COVID-19 policy measures across jurisdictions may have fragmentary effects or give rise to cross-border and cross-sectoral spillovers that may warrant enhanced international coordination. FSB is also exploring ways to facilitate convergence in reporting of data to authorities.
- FSB has publicly consulted on its evaluation on the effects of too-big-to-fail reforms for systemically important banks. The evaluation examined potential fragmentation in cross-border bank lending and in the pre-positioning of financial resources in the global systemically important banks as a result of resolution reforms. The evaluation found that the too-big-to-fail reforms reforms have made banks more resilient and resolvable, the benefits of the reforms significantly outweigh the costs, and certain gaps still need to be addressed. However, the report found no evidence that implementation of these reforms has reduced cross-border lending. Additionally, it found that the internal total loss-absorbing capacity (iTLAC) supports orderly resolution of a cross-border group and incentivizes coordination between home and host authorities, thus helping diminish incentives to ring-fence assets in resolution. The final evaluation report will be published in early 2021.
Keywords: International, Banking, Securities, COVID-19, Market Fragmentation, G20, Too Big to Fail, G-SIB, Resolution Framework, Internal TLAC, OTC Derivatives Reform, Systemic Risk, IOSCO, FSB
Across 35 years in banking, Blake has gained deep insights into the inner working of this sector. Over the last two decades, Blake has been an Operating Committee member, leading teams and executing strategies in Credit and Enterprise Risk as well as Line of Business. His focus over this time has been primarily Commercial/Corporate with particular emphasis on CRE. Blake has spent most of his career with large and mid-size banks. Blake joined Moody’s Analytics in 2021 after leading the transformation of the credit approval and reporting process at a $25 billion bank.
Previous ArticleFDIC Requires Submission of Call Reports by End of October 2020
The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.
The Financial Stability Board (FSB) and the Network for Greening the Financial System (NGFS) published a joint report that outlines the initial findings from climate scenario analyses undertaken by financial authorities to assess climate-related financial risks.
The Financial Stability Board (FSB) published a letter intended for the G20 leaders, highlighting the work that it will undertake under the Indian G20 Presidency in 2023 to strengthen resilience of the financial system.
The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.
The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.
The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups
The European Union has finalized and published, in the Official Journal of the European Union, a set of 13 Delegated and Implementing Regulations applicable to the European crowdfunding service providers.
The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.
The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.
The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.