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 ArticleSRB Reports on Progress in Enhancing Resolvability of Banks
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).
The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.
The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.
The Bank for International Settlements (BIS) published bulletins on lending in decentralized finance (DeFi) system, on blockchain scalability and fragmentation of crypto, and on extractable value and market manipulation in crypto and decentralized finance.
The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.