This letter from the FSB Chair was delivered to G20 Finance Ministers and Central Bank Governors ahead of their meetings in Washington D.C. in October. The letter highlights three areas of the FSB’s work:

  • Ensuring resilience in the face of new risks. Increasing risks meet a financial system that is much more resilient than it was before the financial crisis. However, the long period of sustained global growth and rising asset prices may have weakened the incentives to take precautions against unforeseen events. The FSB is conducting an in-depth analysis of the markets for leveraged loans and collateralized loan obligations. The FSB is also assessing the financial stability implications of structural changes in the financial system, including non-bank finance and technological innovation.
  • Potential financial stability issues from global stablecoins. Stablecoin projects of potentially global reach and magnitude must meet the highest regulatory standards and be subject to prudential supervision and oversight. Possible regulatory gaps should be assessed and addressed as a matter of priority. The FSB has formed a working group, to inform regulatory policy approaches that harness the benefits of financial innovation, while containing associated risks for the financial system, and advise on multilateral responses as necessary. The FSB will submit a consultative report to the G20 in April and a final report in July 2020.
  • Promoting a financial system that supports strong and sustainable global growth. Following its June report on addressing instances of harmful market fragmentation the FSB has submitted a progress report to the G20 on its further work in this area. The FSB is also taking forward its multi-year programme of rigorous evaluation of post-crisis reforms. The evaluation of the effects of those reforms on small and medium-sized enterprises, is nearing completion, while the evaluation of the effects of too-big-to fail reforms for banks is underway.

The letter notes that the development of post-crisis reform policies is nearly complete and implementation is well underway. Yet it emphasises that the FSB’s mission is far from complete. Implementation progress on agreed G20 reforms remains uneven across key reform areas, and the FSB is in the process of evaluating that reforms are working as intended. Looking ahead, authorities need to be ready to address evolving risks to global financial stability, be they related to current downside risks to growth and uncertainties around Brexit, or structural changes in the financial system.