3 December 2019
FSB Vice Chair Klaas Knot sets out the conclusions from the FSB’s evaluation of the effects of the post-crisis financial regulatory reforms on the financing of small and medium-sized enterprises. The evaluation was part of a broader FSB examination of the effects of the G20 regulatory reforms on financial intermediation.
29 November 2019 | PDF full text (2 MB)
This evaluation examines the effects of the post-crisis G20 reforms on the financing of small and medium-sized enterprise (SMEs). As part of a broader FSB examination of the effects of the reforms on financial intermediation, it is motivated by the need to better understand the effects of the reforms on the financing of real economic activity and their contribution to the G20 objective of strong, sustainable, balanced and inclusive economic growth.
Given that banks are the primary providers of external SME financing, the most relevant reforms implemented to date are the initial Basel III capital and liquidity requirements agreed in 2010. These were the focus of both qualitative and quantitative analysis. Consistent with the FSB evaluation framework, other reforms relevant for SME financing that are at an earlier implementation stage or that are national in nature were only analysed qualitatively.
For the reforms in scope, the evaluation finds no material and persistent negative effects on SME financing in general, although there is some differentiation across jurisdictions. There is some evidence that the more stringent risk-based capital requirements under Basel III slowed the pace and in some jurisdictions tightened the conditions of SME lending at those banks that were least capitalised ex ante relative to other banks. These effects are not homogeneous across jurisdictions and they are generally found to be temporary. The evaluation also provides some evidence for a reallocation of bank lending towards more creditworthy firms after the introduction of reforms, but this effect is not specific to SMEs.
SME lending growth has resumed in recent years, although volumes remain below the pre-crisis level in some jurisdictions. Access to external finance for SMEs also appears to have improved, particularly in advanced economies. Stakeholder feedback suggests that SME financing trends are largely driven by factors other than financial regulation, such as public policies and macroeconomic conditions.
Any potential costs found in this evaluation, which appear limited and transitory, should be framed against the wider financial stability benefits of the G20 reforms estimated in ex ante impact assessments. These studies generally found significant net overall benefits in terms of reducing the likelihood and severity (lost output) of financial crises.
The FSB also published today an overview of responses to its public consultation, and a Technical Appendix providing more information on the empirical analysis that was carried out as part of the evaluation.
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Ref no: 44/2019
The Financial Stability Board (FSB) published today its final report on the Evaluation of the effects of financial regulatory reforms on small and medium-sized enterprise (SME) financing, following a public consultation earlier this year. The evaluation is motivated by the need to better understand the effects of the reforms on the financing of real economic activity and their contribution to the G20 objective of strong, sustainable, balanced and inclusive economic growth.
Given that banks are the primary providers of external SME financing, the most relevant reforms implemented to date are the initial Basel III capital and liquidity requirements agreed in 2010. These have been evaluated using both qualitative and quantitative analysis. Consistent with the FSB evaluation framework, other relevant reforms that are at an earlier implementation stage or that are national or regional regulations were only analysed qualitatively.
For the reforms in scope, the evaluation finds no material and persistent negative effects on SME financing in general, although there is some differentiation across jurisdictions. There is some evidence that the more stringent risk-based capital requirements under Basel III slowed the pace and in some jurisdictions tightened the conditions of SME lending at those banks that were least capitalised ex ante relative to other banks. These effects are not homogeneous across jurisdictions and they are generally found to be temporary. The evaluation also provides some evidence for a reallocation of bank lending towards more creditworthy firms after the introduction of reforms, but this effect is not specific to SMEs.
SME lending growth has resumed in recent years, although volumes remain below the pre-crisis level in some jurisdictions. Access to external finance for SMEs also appears to have improved, particularly in advanced economies. Stakeholder feedback suggests that SME financing trends are largely driven by factors other than financial regulation, such as public policies to address SME financing constraints and macroeconomic conditions.
Any potential costs found in this evaluation, which appear limited and transitory, should be framed against the wider financial stability benefits of the G20 reforms estimated in ex ante impact assessments. These studies generally found significant net overall benefits in terms of reducing the likelihood and severity (lost output) of financial crises.
Klaas Knot, FSB Vice Chair and President of De Nederlandsche Bank, who led this work said: “The evaluation provides robust evidence that the post-crisis financial reforms have not led to a material and persistent reduction in SME lending. Indeed, the stronger financial system created by the reforms provides a firm foundation to support SME growth over the long term.”
The evaluation draws on a broad range of information sources and is based on various types of analyses and extensive stakeholder feedback. These include responses to a public consultation; responses by FSB jurisdictions to a questionnaire; input from stakeholders (SMEs, market participants, trade associations, think-tanks and academics) through a roundtable, a call for public feedback; interviews with market participants in FSB jurisdictions; a review of the literature; and empirical analysis using data from commercial providers and FSB member authorities.
The evaluation was undertaken using the FSB’s framework for the post-implementation evaluation of the effects of the G20 financial regulatory reforms. The framework guides analyses of whether the G20 reforms are achieving their intended outcomes, and helps identify any material unintended consequences that may have to be addressed, without compromising on the objectives of the reforms. This is the third evaluation under the FSB framework.
The FSB also published today an overview of responses to its public consultation, and a Technical Appendix providing more information on the empirical analysis that was carried out as part of the evaluation.
The FSB will launch a public consultation on its fourth evaluation, which examines the effects of too-big-to-fail reforms for systemically important banks, in June 2020. The next FSB evaluation will be on the effects of money market fund reforms; the evaluation will be launched in mid-2020 and be completed by end-2021.
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 Randal K. Quarles, Governor and Vice Chairman for Supervision, US Federal Reserve; its Vice Chair is Klaas Knot, President, De Nederlandsche Bank. The FSB Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements.
On 7 June 2019, the FSB published an Evaluation of the effects of financial regulatory reforms on small and medium-sized enterprise (SME) financing for public consultation. Interested parties were invited to provide written comments by 7 August 2019. This note summarises the main points from the responses and sets out the main changes that have been made in the evaluation report to address them. The FSB thanks those who took the time and effort to express their views.
27 November 2019
The Basel Committee on Banking Supervision’s (BCBS) Basel III standard includes a countercyclical capital buffer (CCyB) regime. National authorities can implement a CCyB requirement to ensure that the banking system has an additional buffer of capital to protect against potential future losses related to downturns in the credit cycle.
A sectoral countercyclical capital buffer (SCCyB) is a useful complement to the CCyB. While a bank’s additional capital requirements following the activation of the CCyB depend on total risk-weighted assets, a SCCyB is a more targeted measure allowing national authorities to temporarily impose additional capital requirements that directly address the build-up of risk in a specific sector. The impact of a SCCyB would depend on a bank’s exposure to a targeted credit segment (eg, residential real estate loans). Targeted tools such as the SCCyB may be effective to aid in building resilience early and in a specifc manner, to more efficiently minimise unintended side effects, and may be used more flexibly than broad-based tools.
These guiding principles are intended to support the implementation of a SCCyB on a consistent basis across jurisdictions. The guiding principles are not included in the Basel standards and are only applicable for those jurisdictions that choose to implement them on a voluntarily basis.
26 November 2019
This report was originally published on 12 November 2015. Updates were made on 19 July and 26 November 2019.
This document sets out the regulatory framework for haircuts on certain non-centrally cleared securities financing transactions (SFTs). The framework aims to address financial stability risks associated with SFTs. The report includes numerical haircut floors to apply to non-bank-to-non-bank SFTs that were finalised after taking into account responses to a public consultation in October 2014.
22 November 2019 | PDF full text (205 KB)
The 2019 list of global systemically important banks (G-SIBs), uses end-2018 data and an assessment methodology designed by the Basel Committee on Banking Supervision (BCBS).
One bank (Toronto Dominion) has been added to the list of G-SIBs that were identified in 2018, and therefore the overall number of G-SIBs increases from 29 to 30.
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Ref no: 43/2019
The Financial Stability Board (FSB) today published the 2019 list of global systemically important banks (G-SIBs) using end-2018 data and an assessment methodology designed by the Basel Committee on Banking Supervision (BCBS).
One bank (Toronto Dominion) has been added to the list of G-SIBs that were identified in 2018, and therefore the overall number of G-SIBs increases from 29 to 30.
FSB member authorities apply the following requirements to G-SIBs:
Higher capital buffer: The G-SIBs are allocated to buckets corresponding to higher capital buffers that national authorities require banks to hold in accordance with international standards. Compared with the 2018 list of G-SIBs, one bank have moved to a lower bucket: Deutsche Bank has moved from bucket 3 to bucket 2.
Total Loss-Absorbing Capacity (TLAC): G-SIBs are required to meet the TLAC standard, alongside the regulatory capital requirements set out in the Basel III framework. The TLAC standard began being phased in from 1 January 2019 for G-SIBs identified in the 2015 list (provided that they continued to be designated as G-SIBs thereafter).
Resolvability: These include group-wide resolution planning and regular resolvability assessments. The resolvability of each G-SIB is also reviewed in a high-level FSB Resolvability Assessment Process (RAP) by senior regulators within the firms’ Crisis Management Groups.
Higher supervisory expectations: These include heightened supervisory expectations for risk management functions, risk data aggregation capabilities, risk governance and internal controls.
BCBS today published updated denominators used to calculate banks’ scores and the values of the underlying twelve indicators for each bank in the assessment sample. The BCBS also published the thresholds used to allocate the G-SIBs to buckets, as well as updated links to public disclosures of all banks in the sample.
A new list of G-SIBs will next be published in November 2020.
The requirements for G-SIBs summarised above are “higher” in the sense that they are additional to the minimum standards that apply to all internationally active banks under the Core Principles of the BCBS.
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 Randal K. Quarles, Governor Vice Chairman for Supervision, US Federal Reserve; its Vice Chair is Klaas Knot, President, De Nederlandsche Bank. The FSB Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements.