FSB Chair’s letter to G20 Finance Ministers and Central Bank Governors: October 2024

22 October 2024 | PDF full text (113 KB)

The FSB is committed to developing a robust framework to harness the opportunities from digitalisation while mitigating associated risks, to support Brazil’s G20 Presidency goal of building a just world and sustainable planet.

This letter from the FSB Chair, Klaas Knot, to G20 Finance Ministers and Central Bank Governors ahead of their meeting on 23-24 October focuses the FSB’s work to harness the benefits and respond to the challenges of technological innovation. The letter covers:

Depositor behaviour and interest rate and liquidity risks in the financial system

The March 2023 banking turmoil illustrated the role that technological advancements can play in accelerating the propagation of shocks. The letter covers the FSB’s analysis on the role of technology, social media, and interest rates on depositor behaviour and deposit ‘stickiness’. The report will be submitted to the G20 ahead of this meeting.

Cyber and operational resilience

Cyber and operational risks to financial stability were illustrated by the CrowdStrike outage and by operational disruptions in high-value messaging and payments systems in July. To facilitate efficient and effective response and recovery from operational this, the FSB is delivering, for public consultation, a common Format for Incident Reporting Exchange (FIRE).

Crypto-assets

The FSB’s status report outlines the progress made by jurisdictions in implementing the global regulatory framework for crypto-asset policy and regulatory responses developed by the IMF, FSB and standard-setting bodies.

Tokenisation

The FSB’s report on the financial stability implications of tokenisation outlines steps that authorities and international bodies should consider to address data gaps in monitoring tokenisation adoption; increase understanding of how its features fit into legal and regulatory frameworks and supervisory approaches; and facilitate cross-border information sharing.

The Financial Stability Implications of Tokenisation

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Tokenisation has the potential to offer benefits to the financial system, such as increased efficiency and transparency, but it may also have financial stability implications.

This report is focused on a subset of tokenisation initiatives – tokenisation based on distributed ledger technology (DLT) as the underlying technology platform – assessed to be the most relevant for financial stability based on recent market developments. In particular, the report focuses on the tokenisation of financial assets, such as tokenised money that may potentially be used as a settlement asset for payments and other financial assets. It does not examine tokenisation initiatives involving central bank digital currencies (CBDCs) or crypto-assets.

The report analyses recent developments in DLT-based tokenisation, including the potential uses of tokenised assets and their interaction with the traditional financial system.

The limited publicly available data on tokenisation suggest that its adoption is very low but appears to be growing. Owing to its small scale, tokenisation does not, therefore, currently pose a material risk to financial stability. Nevertheless, the report identifies several financial stability vulnerabilities associated with DLT-based tokenisation, which relate to liquidity and maturity mismatch; leverage; asset price and quality; interconnectedness; and operational fragilities. Tokenisation could have implications for financial stability if the tokenised part of the financial system scales up significantly, if increased complexity and opacity of tokenisation projects lead to unpredictable outcomes in times of stress, and if identified vulnerabilities are not adequately addressed through oversight, regulation, supervision, and enforcement.

The report reviews the financial stability implications of these identified vulnerabilities and sets out considerations for the FSB and relevant standard-setting bodies.

G20 Crypto-asset Policy Implementation Roadmap: Status report

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Promoting, supporting, and monitoring the effective implementation of a coordinated and comprehensive policy and regulatory response to address the risks of crypto-assets is a priority of the G20.

This status report reflects the progress made in taking forward the IMF-FSB crypto-asset policy implementation roadmap.

Jurisdictions have made progress in implementing the policy and regulatory responses developed by the IMF, FSB, and standard-setting bodies (SSBs). Nearly all FSB member jurisdictions have plans in place to develop new or revise their existing regulatory frameworks for crypto-assets and stablecoins, or they already have those frameworks in place. To raise awareness of their policy frameworks and support implementation beyond the G20, the IMF, FSB, SSBs and the Financial Action Task Force have organised workshops, outreach sessions, knowledge sharing events, and capacity building programmes.

Nevertheless, despite the progress, challenges remain. Inconsistent implementation of the FSB Framework may hinder its effectiveness and lead to regulatory arbitrage. Cross-border crypto-asset activities that originate from offshore jurisdictions present elevated regulatory and supervisory challenges for authorities. The prevalence of non-compliance with applicable laws and regulations significantly undermines efforts to implement the FSB Framework and other international standards on crypto-assets. Stablecoins should be subject to specific regulatory requirements due to their vulnerability to a sudden loss in confidence and to potential runs on the issuer or underlying reserve assets.

The IMF and FSB, together with the SSBs and other international organisations, will continue to support and promote a globally coordinated and comprehensive policy and regulatory approach to crypto-asset markets. The FSB will conduct a review of the status of implementation of the FSB Framework by end-2025.

G20 Roadmap for Enhancing Cross-border Payments: Consolidated progress report for 2024

21 October 2024 | PDF full text (535 KB)

While good progress continues in completing the Roadmap’s priority actions, it will take time for some of the priority actions to translate into tangible outcomes.

Focused monitoring of progress against the G20 Roadmap for Enhancing Cross-Border Payments helps to maintain momentum and provides accountability. The FSB closely monitors efforts to advance or complete the Roadmap’s priority actions.

This report outlines progress made by the FSB, in coordination with the Bank for International Settlements’ Committee on Payments and Market Infrastructures (CPMI) and other relevant international organisations and standard-setting bodies over the past year on the priority actions, including efforts to strengthen engagement with cross-border payments markets participants.

High-level overview of the G20 cross-border pyments targets
High-level overview of the G20 targets

The report also looks at the key insights from the Key Performance Indicators (KPIs) monitoring report that was published alongside this report.

While more than half of the priority actions have been completed, the KPI report suggests that the work done so far is not yet sufficient and that further efforts are needed to meet the quantitative targets for cross-border payments. Indeed, more effort is needed to gain the benefits of the work already delivered through the priority actions and to encourage jurisdiction level implementation of the policies and recommendations emerging from them.

To fulfil the G20’s objectives, the FSB, CPMI and other partner organisations are strongly committed to achieving tangible results by completing the priority actions, encouraging implementation by both the private and public sector, and identifying ways to facilitate greater progress.

Annual Progress Report on Meeting the Targets for Cross-border Payments: 2024 Report on Key Performance Indicators

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An important goal for the FSB in developing the KPIs, which capture key aspects of the user experience, is to stimulate conversation among public and private sector stakeholders about the challenges and the potential ways forward.

Focused monitoring of progress against the G20 Roadmap for Enhancing Cross-Border Payments helps to maintain momentum and provides accountability. In 2022, the G20 endorsed a set of quantitative global targets for addressing the four challenges in the performance of cross-border payments across three market segments: wholesale payments, retail payments and remittances. This is the second year the FSB has published the estimates of the Key Performance Indicators (KPIs), which were developed to monitor progress against these targets.

Overall, at the global level, the KPIs show limited progress toward achieving the targets. Differences across regions and corridors remain. Some regions continue to face greater challenges, particularly in meeting the targets set for cost and speed. The results are not surprising, as it will take time for the actions carried out under the Roadmap to materialise and for the industry participants to adapt, so that clear improvements are perceived by the end users of cross-border payments.

An overview of the progress in the actions carried out under the Roadmap is presented in the consolidated Progress Report for 2024.

FSB urges stronger efforts to enhance cross border payments

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Ref: 22/2024

  • FSB publishes reports detailing work to enhance cross-border payments and welcomes the significant achievements of standard setters and international bodies in reducing obstacles to more effective cross border payments.
  •  At the global level, the FSB’s key performance indicators (KPIs) indicate that significant progress will be needed to improve the user experience across all payments market segments.
  • In addition, some jurisdictions have made no tangible progress towards implementing the actions previously set out by the FSB to improve LEI adoption.
  • The FSB calls for continued commitment and collaboration from multiple public and private sector organisations in order to achieve tangible results.

The Financial Stability Board (FSB) today published (i) a consolidated progress report for 2024 reporting on a broad range of actions being progressed as part of  the G20 Roadmap for Enhancing Cross-Border Payments; (ii) a progress report on the implementation of the Legal Entity Identifier (LEI); and (iii) an annual progress report on meeting the improved user experience targets for cross-border payments.

Over the past year, global efforts to enhance cross-border payments, led by the FSB, in coordination with the Bank for International Settlements Committee on Payments and Market Infrastructures (CPMI) and relevant international organisations and standard-setting bodies, have continued apace. Strong progress was made in the G20 Roadmap’s planned actions. These include harmonisation of ISO 20022 data requirements and the extension of operating hours, as well as key reports on the use of application programming interfaces (APIs) and the interlinking of fast payment systems (FPS). Progress was also made in addressing frictions arising from requirements for managing payments data and access to becoming a payments services provider. Recommendations on these two topics will be issued in December 2024.

Adoption of the LEI has continued to grow at double-digit rates since 2019. While widespread LEI implementation has been reached in OTC derivatives and securities markets, adoption in cross-border payments remains a challenge. The costs, particularly in low-income jurisdictions, and the lack of perceived incentives for voluntary adoption by market participants and end users, among other things, are notable obstacles to the wider adoption of the LEI. Some jurisdictions have made no tangible progress towards implementing the FSB’s previously outlined actions. To maintain the momentum in expanding LEI adoption, particularly for cross-border payments, the FSB reiterates its 2022 recommendations and advocates for their full and timely implementation. The report includes additional recommendations for oversight authorities and standard-setting bodies to support this.

Nevertheless, while more than half of the planned actions set out by the G20 have been completed, the FSB’s key performance indicators which measure key aspects of the user experience in using payments services, suggest that further efforts are needed. The FSB emphasises the importance of intensified effort and commitment from a range of stakeholders, including by domestic regulatory/oversight authorities and payments services providers. The FSB, CPMI and other partner standard-setting and international organisations are strongly committed to achieving tangible results by completing the planned actions, and supporting implementation by payments services providers and oversight authorities.

Notes to editors

The G20 has made enhancing cross-border payments a priority to achieve faster, cheaper, more transparent and more inclusive cross-border payments, while maintaining their safety and security. In 2020, the FSB, in coordination with the CPMI and other international organisations and standard-setting bodies, developed a Roadmap to address these challenges. To provide accountability, in 2021, the G20 endorsed quantitative global targets related to the wholesale, retail and remittance market segments. In 2022, the FSB issued recommendations for improving the adoption of the Legal Entity Identifier (LEI) in cross-border payments to support G20 roadmap’s objectives.

To move the Roadmap forward and facilitate achieving the G20 targets in 2027, in February 2023, the FSB outlined specific actions that will be taken under three priority themes covering: payment system interoperability and extension; legal, regulatory and supervisory frameworks; and cross-border exchange and message standards.

The FSB coordinates at the international level the work of national financial authorities and international standard-setting bodies and develops and promotes the implementation of effective regulatory, supervisory, and other financial sector policies in the interest of financial stability. It brings together national authorities responsible for financial stability in 24 countries and jurisdictions, international financial institutions, sector-specific international groupings of regulators and supervisors, and committees of central bank experts. The FSB also conducts outreach with approximately 70 other jurisdictions through its six Regional Consultative Groups.

Implementation of the Legal Entity Identifier: Progress report

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The benefits of the LEI have been recognised for a broad range of use cases in the financial sector, including cross-border payments.

The Legal Entity Identifier (LEI) was established in 2012 as a way to uniquely identify counterparties to financial transactions across borders, and thereby to improve and standardise financial data for a variety of purposes. In 2022, the FSB explored how the LEI could help achieve the goals of the G20 Roadmap for faster, cheaper, more inclusive and more transparent cross-border payments. Both authorities and market participants have recognised the potential benefits of the LEI in strengthening data standardisation as well as assisting know-your-customer (KYC) processes, and sanctions screening, including the Bank for International Settlements Committee on Payments and Market Infrastructures, and the Financial Action Task Force.

Globally, the number of active LEIs has reached 2.6 million, increasing by 84% compared to 2019. The LEI is widely used in particular in OTC derivatives and securities markets, but its benefits have been recognised for a broad range of use cases in the financial sector.

Nevertheless, broader adoption of the LEI in cross-border payments remains challenging. The costs, particularly in low-income jurisdictions, and the lack of perceived incentives for voluntary adoption by market participants and end users, among other things, are notable obstacles to the wider adoption of the LEI. Some jurisdictions have made no tangible progress towards implementing the FSB’s previously outlined actions. To maintain the momentum in expanding LEI adoption, particularly for cross-border payments, the FSB reiterates its 2022 recommendations and advocates for their full and timely implementation. The report includes additional recommendations for oversight authorities and standard-setting bodies to support this.

Recommendations
  1. FSB member jurisdictions, in collaboration with the ROC and the GLEIF:
  • Continue exploring ways to promote LEI adoption, particularly outside the financial sector, including ways to promote awareness and adoption of the verifiable LEI to enhance trust in digital exchanges through verifiable authentication.
  • Explore, where appropriate, the scope to mandate use of the LEI for certain payment message types for routing message formats migrating to ISO 20022 messages.
  • Continue exploring, with national regulators and others, the role the LEI might play in assisting entities with due diligence for KYC, as well as other use cases such as sanctions screening.
  • Consider a staged approach to the introduction of the LEI requirement in payment messages, by assessing which categories of entities or which thresholds of payment value could be considered for the gradual introduction of LEI requirements for payments.
  1. Relevant standard-setting bodies and international organisations should consider issuing guidance on the role that the LEI and possibly the vLEI might play in assisting entities with due diligence for KYC and sanctions screening, and fraud prevention.

FSB consults on a common format for the reporting of operational incidents

17 October 2024

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Ref: 21/2024

  • FSB reveals its common Format for Incident Reporting Exchange (FIRE) that financial firms can use for the reporting of operational incidents, including cyber incidents.
  • Effective incident reporting strengthens supervision and regulation, fostering transparency and accountability in financial institutions by ensuring regulators are promptly informed of significant operational issues.
  • Reducing fragmentation in incident reporting is critical in a globalised financial system where incidents can have cross-border implications. FIRE aims to increase convergence and facilitate communication within and across jurisdictions.

The Financial Stability Board (FSB) published today for consultation a Format for Incident Reporting Exchange (FIRE), a common format for financial firms’ reporting of operational incidents, including cyber incidents. FIRE aims to promote convergence in reporting practices, to address operational challenges arising from reporting to multiple authorities, and to foster better communication within and across jurisdictions. FIRE builds on the FSB Recommendations to Achieve Greater Convergence in Cyber Incident Reporting, published in 2023.

Incident reporting is a key mechanism for financial authorities to monitor disruptions within regulated entities. Currently, differences in reporting approaches across jurisdictions result in fragmented requirements and coordination challenges, which could exacerbate financial stability risks arising from operational incidents, including cyber incidents. Greater convergence between reporting frameworks will support financial institutions’ efficient incident response and recovery, as well as more effective supervision and cooperation among authorities.

Developed in consultation with the private sector, FIRE provides a set of common information items for reporting incidents. Its design maximises flexibility and interoperability. Authorities can choose the extent to which they adopt FIRE, leveraging its features and definitions to promote convergence and facilitate translation between existing frameworks. Similarly, financial institutions can use FIRE both in their reporting to financial authorities and in their relationships with service providers. The consultation package consists of (i) a ‘human-readable’ format, (ii) a structured data model of FIRE using the reporting-language-agnostic Data Point Model method, and (iii) a taxonomy in eXtensible Business Reporting Language (XBRL) as a sample machine-readable version of FIRE.

The FSB is inviting comments on the consultation package and the questions set out. Responses should be submitted via this secure online form by 19 December 2024.

Responses will be published on the FSB’s website unless respondents expressly request otherwise on the online form.

For questions, or if you wish to submit supplementary material, please contact the FSB by email ([email protected]).

Notes to editors

The FSB published a report on Cyber Incident Reporting: Existing Approaches and Next Steps for Broader Convergence in October 2021. The report set out three ways to achieve greater convergence in cyber incident reporting: developing best practices for incident reporting; identifying common types of information to be shared; and creating common terminologies for cyber incident reporting. The FSB followed up, in April 2023, with a comprehensive approach to achieving greater convergence in cyber incident reporting, which included an updated cyber lexicon and a concept for developing a common format for incident reporting exchange (FIRE).

The FSB coordinates at the international level the work of national financial authorities and international standard-setting bodies and develops and promotes the implementation of effective regulatory, supervisory, and other financial sector policies in the interest of financial stability. It brings together national authorities responsible for financial stability in 24 countries and jurisdictions, international financial institutions, sector-specific international groupings of regulators and supervisors, and committees of central bank experts. The FSB also conducts outreach with approximately 70 other jurisdictions through its six Regional Consultative Groups.

The FSB is chaired by Klaas Knot, President of De Nederlandsche Bank. The FSB Secretariat is located in Basel, Switzerland and hosted by the Bank for International Settlements.

Format for Incident Reporting Exchange (FIRE): Consultation report

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Summary of document history

Summary of document history

The FSB has developed FIRE to reduce fragmentation in the reporting of operational incidents, including cyber incidents, and enhance cross-border cooperation.

This consultation report sets out a common format that financial firms can use for the reporting of operational incidents, including cyber incidents. The proposed Format for Incident Reporting Exchange (FIRE) provides a set of common information items and is designed in a way to maximise flexibility and interoperability. FIRE’s features support flexibility for authorities that adopt the format in full or in part. For instance, of the 99 information items defined, 51 are optional, allowing authorities to decide which to implement based on their needs.

Incident reporting is a key mechanism for supervisors to monitor disruptions within financial firms. However, differences in reporting approaches across jurisdictions result in fragmented requirements and coordination challenges. FIRE aims to promote convergence, address operational challenges arising from reporting to multiple authorities and foster better communication within and across jurisdictions.

The consultation package consists of (i) a ‘human-readable’ format, (ii) a structured data model of FIRE using the reporting-language-agnostic Data Point Model method, and (iii) a taxonomy in eXtensible Business Reporting Language (XBRL) as a sample machine-readable version of FIRE. The taxonomy package is linked in the right-hand column of this page.

The consultation package consists of (i) a ‘human-readable’ format, (ii) a structured data model of FIRE using the reporting-language-agnostic Data Point Model method, and (iii) a taxonomy in eXtensible Business Reporting Language (XBRL) as a sample machine-readable version of FIRE. The taxonomy package is linked below.

FIRE has been developed by the FSB in consultation with private sector participants. The FSB invites comments on this consultation report and welcomes replies to the consultation questions by 19 December 2024. Responses will be published on the FSB’s website unless respondents expressly request otherwise.

FSB Asia Group discusses technological innovation, emerging risks and resolution regimes

16 October 2024

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Ref: 20/2024

The Financial Stability Board (FSB) Regional Consultative Group for Asia (RCG Asia) met today in Hong Kong SAR.

Members exchanged insights from a workshop on 15 October, co-organised with the International Organization of Securities Commissions Asia Pacific Regional Committee (IOSCO APRC), on the financial stability implications of crypto-assets, tokenisation and artificial intelligence. Participants discussed how the new regulatory environment for crypto-assets has led to the creation of more exchanges, fragmenting liquidity across jurisdictions and creating an uneven playing field with entities that reside outside the regulatory perimeter. Increased convergence between decentralised finance and traditional finance necessitates enhanced monitoring and greater supervisory and regulatory cooperation within and across borders. Members supported collaboration between RCG Asia and IOSCO APRC on future issues of significance to financial stability.

The group then discussed global and regional financial market developments. Recent market volatility in the region highlights ongoing concerns over the macroeconomic environment. Members also discussed the role of technology in the financial system, leading to new interconnections and dependencies, as demonstrated by the CrowdStrike outage and operational disruptions in high-value messaging and payments systems in July.

Members acknowledged the relevance of the FSB’s toolkit for third-party risk management, which aims to help financial institutions monitor, identify, and manage risks arising from third-party services. They noted that operational risks are compounded by the increasing number and complexity of financial fraud cases. The group discussed these challenges and explored the scope for better cross-border and cross-agency cooperation.

Reflecting on lessons from the 2023 banking turmoil, members shared information on recent changes to their resolution strategies and tools. They reviewed progress in implementing the FSB Key Attributes for Effective Resolution Regimes for Financial Institutions. Members look forward to the FSB’s upcoming report, which will summarise the work on interest and liquidity risk and on depositor behaviour and the role of technology and social media.

Members received an update on the FSB’s work programme for 2024 and shared their thoughts on areas for consideration as the FSB develops its plans for 2025.

Notes to editors

The FSB RCG Asia is co-chaired by Eddie Yue, Chief Executive, Hong Kong Monetary Authority and P Nandalal Weerasinghe, Governor, Central Bank of Sri Lanka. Membership of the RCG Asia comprises financial authorities from Australia, Brunei Darussalam, Cambodia, China, Hong Kong SAR, India, Indonesia, Japan, Korea, Malaysia, New Zealand, Pakistan, Philippines, Singapore, Sri Lanka, Thailand and Vietnam.

The FSB has six Regional Consultative Groups, established under the FSB Charter, to bring together financial authorities from FSB member and non-member countries to exchange views on vulnerabilities affecting financial systems and on initiatives to promote financial stability.1 Typically, each Regional Consultative Group meets twice each year.

The FSB coordinates at the international level the work of national financial authorities and international standard-setting bodies and develops and promotes the implementation of effective regulatory, supervisory, and other financial sector policies in the interest of financial stability. It brings together national authorities responsible for financial stability in 24 countries and jurisdictions, international financial institutions, sector-specific international groupings of regulators and supervisors, and committees of central bank experts. The FSB also conducts outreach with approximately 70 other jurisdictions through its six Regional Consultative Groups.

The FSB is chaired by Klaas Knot, President of De Nederlandsche Bank. The FSB Secretariat is located in Basel, Switzerland and hosted by the Bank for International Settlements.

  1. The FSB Regional Consultative Groups cover the following regions: Americas, Asia, Commonwealth of Independent States, Europe, Middle East and North Africa, and sub-Saharan Africa. ↩︎