FSB Europe group discusses financial vulnerabilities and responses to the COVID-19 pandemic

28 May 2020

Press enquiries:
+41 61 280 8138
[email protected]
Ref no: 17/2020

The Financial Stability Board (FSB) Regional Consultative Group (RCG) for Europe held a conference call today to discuss global and regional macroeconomic and financial market developments and their potential impact on European economies.

Members exchanged views on the latest financial stability implications of COVID-19, including the wide range of policy measures authorities have taken to sustain the supply of credit to the real economy, to support financial intermediation, and to preserve the functioning and resilience of the global financial system, as well as their effectiveness. The group highlighted the importance of stress tests concerning banks’ asset quality and lending capacity, and of considering how policy measures might need to evolve over time.

The group also received an update on the FSB’s work programme, which has been re-prioritised to focus on responding to the impact of COVID-19 on the financial system. Members welcomed the FSB’s policy work on enhancing global payment systems, LIBOR transition and other areas to promote a strong global financial system that supports the real economy.

Notes to editors

The RCG Europe is co-chaired by Katharine Braddick, Director General, Financial Services at the UK Treasury and Henry Ohlsson, Deputy Governor, Sveriges Riksbank. The membership of the FSB Regional Consultative Group for Europe includes financial authorities from Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Luxembourg, Netherlands, Norway, Poland, Portugal, Romania, Spain, Sweden, Switzerland, Ukraine, United Kingdom and the Group of International Finance Centre Supervisors. The European Commission, the European Central Bank, the ECB Banking Supervision, and European Banking Authority also attended the meeting.

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 is chaired by Randal K. Quarles, Vice Chairman, US Federal Reserve; its Vice Chair is 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. [←]

Financial policymakers discuss responses to COVID-19 with the private sector

26 May 2020

Ref no: 16/2020

Financial policymakers and international standard setters today met virtually with private sector executives to discuss international policy responses to COVID-19. Organised by the FSB’s Standing Committee on Supervisory and Regulatory Cooperation (SRC), in cooperation with Basel Committee on Banking Supervision (BCBS), the Committee on Payments and Market Infrastructures (CPMI), the International Association of Insurance Supervisors (IAIS) and the International Organization of Securities Commissions (IOSCO), the meeting brought together senior representatives from central banks, regulatory authorities and finance ministries as well as about 30 international banks, insurance firms, asset managers, market infrastructures and credit rating agencies. The meeting was chaired by Himino Ryozo, Chair of the SRC and Vice Minister for International Affairs, Japan Financial Services Agency.

The meeting explored the effectiveness of prudential and other financial policy measures taken to date, including experiences with their implementation. Participants also discussed policy issues going forward, notably how financial institutions can better cope with the challenges resulting from rising solvency risks, and exchanged views on potential areas that may warrant further policy coordination.

After the call, Himino Ryozo said: “The global financial system entered the crisis with much enhanced resilience and, with central bank intervention, the liquidity stress in March was largely contained. But the world still faces an unprecedented level of uncertainties. Participants discussed issues which may arise in different phases of the crisis under a range of scenarios. Insights gained today will help the private and official sectors act to ensure financing to the economy, financial stability, and eventually, a strong recovery.”

The discussion at the meeting will help inform ongoing work in the FSB, BCBS, CPMI, IAIS, and IOSCO, and serve as input into the FSB’s report on COVID-19 policy responses to the July G20 meeting.

Notes to editors

Opening remarks by Himino Ryozo are available on the FSB website.

Press enquiries: BIS (BCBS/CPMI): +41 61 280 8188, [email protected] | FSB: +41 61 280 8138, [email protected] | IAIS: +41 61 280 8602 [email protected] | IOSCO: + 34 91 787 0419, [email protected]

FSB compensation workshop 2019: Key takeaways

8 May 2020 | PDF full text (252 KB)

This note provides key takeways from a November 2019 workshop with banks, insurance and asset management firms, trade associations and academia on the implementation of compensation reforms. As part of its work to monitor implementation of its Principles for Sound Compensation Practices and their Implementation Standards, the FSB engages regularly with firms across financial sectors to assess the extent to which the standards have been effectively implemented. This workshop focused on: 

  1. Assessing the effectiveness of compensation policies – the discussion considered the steps firms are taking to assess the effectiveness of compensation policies and practices they have established and implemented.

  2. Use of data by firms as part of compensation practices – participants considered how firms use data to implement compensation policies and practices.

  3. Regulatory and legal issues – the discussion focused on the extent to which legal barriers and conflicts between elements of the Principles and Standards and regulatory frameworks exist, and possible steps to address these.

  4. Developments on compensation and risk alignment research – participants discussed academic research and empirical evidence on the effectiveness of compensation and risk alignment.

The takeaways from the workshop are an input into the FSB’s ongoing work to assess effective compensation practices.

FSB consults on guidance on assessing the adequacy of financial resources for CCP resolution

4 May 2020

Press enquiries:
+41 61 280 8138
[email protected]
Ref no: 15/2020

The Financial Stability Board (FSB) today published a public consultation report on Guidance on financial resources to support CCP resolution and on the treatment of CCP equity in resolution. The guidance will assist central counterparty (CCP) resolution authorities.

Central clearing of standardised over-the-counter (OTC) derivatives is a key pillar of the G20 Leaders’ commitment to reform OTC derivatives markets in response to the 2008 financial crisis. Increased central clearing has simplified the previously complex and opaque web of derivatives exposures. In addition, more collateral is in place to reduce counterparty credit risks. At the same time, CCPs’ criticality to the overall safety and soundness of the financial system means that authorities must take steps to ensure that CCPs do not themselves become a source of systemic risk and that they can be successfully resolved without exposing taxpayers to loss.

The draft guidance is based on the concepts included in a discussion paper the FSB published in 2018. It takes into account the comments received in that earlier public consultation and feedback from the resolution authorities of CCPs.

Part I of the guidance proposes five steps to guide the authorities in assessing the adequacy of a CCP’s financial resources and the potential financial stability implications of their use. The authorities should:

  • Step 1: identify hypothetical default and non-default loss scenarios (and a combination of them) that may lead to a resolution of a CCP;

  • Step 2: conduct a qualitative and quantitative evaluation of existing resources and tools available in the resolution of the CCP;

  • Step 3: assess potential resolution costs;

  • Step 4: compare existing resources and tools to resolution costs and identify any gaps; and

  • Step 5: evaluate the availability, costs and benefits of potential means of addressing any identified gaps.

Part II of the guidance addresses the treatment of CCP equity in resolution. It provides a framework for resolution authorities to evaluate the exposure of CCP equity to losses in recovery, liquidation and resolution and how (where it is possible) the treatment of CCP equity in resolution could be adjusted.

The FSB welcomes responses to the questions set out in the public consultation report by 31 July 2020.

Notes to editors

The FSB, the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) have cooperated closely in developing their respective standards and guidance for CCP recovery and resolution, paying particular attention to the interaction between CCP recovery and resolution to ensure consistency between their respective policies. The FSB’s Key Attributes are the umbrella standard for resolution regimes covering financial institutions of all types that could be systemic in failure.

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, Vice Chairman, US Federal Reserve; its Vice Chair is Klaas Knot, President of De Nederlandsche Bank. The FSB Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements.

Guidance on financial resources to support CCP resolution and on the treatment of CCP equity in resolution: Consultative document

| PDF full text (569 KB)

Summary of document history

Summary of document history

This public consultation report provides guidance that will assist central counterparty (CCP) resolution authorities.

Central clearing of standardised over-the-counter (OTC) derivatives is a key pillar of the G20 Leaders’ commitment to reform OTC derivatives markets in response to the 2008 financial crisis. Increased central clearing has simplified the previously complex and opaque web of derivatives exposures. In addition, more collateral is in place to reduce counterparty credit risks. At the same time, CCPs’ criticality to the overall safety and soundness of the financial system means that authorities must take steps to ensure that CCPs do not themselves become a source of systemic risk and that they can be successfully resolved without exposing taxpayers to loss.

The draft guidance is based on the concepts included in a discussion paper the FSB published in 2018. It takes into account the comments received in that earlier public consultation and feedback from the resolution authorities of CCPs.

Part I of the guidance proposes five steps to guide the authorities in assessing the adequacy of a CCP’s financial resources and the potential financial stability implications of their use. The authorities should:

  • Step 1: identify hypothetical default and non-default loss scenarios (and a combination of them) that may lead to a resolution of a CCP;

  • Step 2: conduct a qualitative and quantitative evaluation of existing resources and tools available in the resolution of the CCP;

  • Step 3: assess potential resolution costs;

  • Step 4: compare existing resources and tools to resolution costs and identify any gaps; and

  • Step 5: evaluate the availability, costs and benefits of potential means of addressing any identified gaps.

Part II of the guidance addresses the treatment of CCP equity in resolution. It provides a framework for resolution authorities to evaluate the exposure of CCP equity to losses in recovery, liquidation and resolution and how (where it is possible) the treatment of CCP equity in resolution could be adjusted.

The FSB, the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) have cooperated closely in developing their respective standards and guidance for CCP recovery and resolution, paying particular attention to the interaction between CCP recovery and resolution to ensure consistency between their respective policies. The FSB’s Key Attributes are the umbrella standard for resolution regimes covering financial institutions of all types that could be systemic in failure. In July 2017 the standard-setters completed a workplan to coordinate international policy issues related to CCPs, with the publication of guidance on CCP resilience, recovery and resolution.

The FSB is inviting comments on this consultation report. Responses should be sent to [email protected] with “CCP consultation” in the subject line by 31 July 2020. Responses will be published on the FSB’s website unless respondents expressly request otherwise.

FSB Sub-Saharan Africa group discusses regional financial stability and the impact of COVID-19

28 April 2020

Press enquiries:
+41 61 280 8138
[email protected]
Ref no: 14/2020

The Financial Stability Board (FSB) Regional Consultative Group (RCG) for Sub-Saharan Africa held a conference call today to discuss recent macroeconomic and financial market developments, including the financial stability implications from COVID-19.

Members discussed global and regional financial vulnerabilities including the sharp contraction in economic growth reflecting a combination of demand and supply shocks caused by the pandemic. In particular, they discussed the impact of existing high debt levels in the region, significant capital outflows and access to US dollar funding. The group also considered the effectiveness of policy responses to address the financial stability implications of COVID-19.

Members noted the importance of FSB and non-FSB members continuing to coordinate action, including financial policy responses in their jurisdictions, to maintain global and regional financial stability, keep markets open and functioning, and preserve the financial system’s capacity to finance growth.

The Group also received an update on FSB’s work programme which has been reprioritised to focus on measures to tackle the impact of COVID-19 on the financial system. Members welcomed the FSB policy work in several areas to promote a global financial system that supports a strong recovery after the pandemic.

Notes to editors

The FSB RCG for Sub-Saharan Africa is co-chaired by Lesetja Kganyago, Governor, South African Reserve Bank and Ernest Addison, Governor, Bank of Ghana. Membership includes financial authorities from Angola, Botswana, Ghana, Kenya, Mauritius, Namibia, Nigeria, South Africa, Tanzania, Uganda and Zambia as well as the Central Bank of West African States (BCEAO) and the Bank of Central African States (BEAC). Permanent observers include the Committee of Central Bank Governors of the Southern African Development Community, and the East African Community.

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 Randal K. Quarles, Vice Chairman, 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.

  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. [←]

Effective Practices for Cyber Incident Response and Recovery: Consultative document

20 April 2020 | PDF full text (2 MB)

Summary of document history

Summary of document history

This consultative document provides a toolkit of effective practices to assist financial institutions before, during and after a cyber incident.

Cyber incidents pose a threat to the stability of the global financial system. In recent years, there have been a number of major cyber incidents that have significantly impacted financial institutions and the ecosystems in which they operate. A major cyber incident, if not properly contained, could seriously disrupt financial systems, including critical financial infrastructure, leading to broader financial stability implications.

Efficient and effective response to and recovery from a cyber incident by organisations in the financial ecosystem are essential to limiting any related financial stability risks. Such risks could arise, for example, from interconnected information technology systems between multiple financial institutions or between financial institutions and third-party service providers, from loss of confidence in a major financial institution or group of financial institutions, or from impacts on capital arising from losses due to the incident. The toolkit lists 46 effective practices, structured across seven components:

  1. Governance – frames how cyber incident and recovery is organised and managed.

  2. Preparation – to establish and maintain capabilities to respond to cyber incidents, and to restore critical functions, processes, activities, systems and data affected by cyber incidents to normal operations.

  3. Analysis – to ensure effective response and recovery activities, including forensic analysis, and to determine the severity, impact and root cause of the cyber incident to drive appropriate response and recovery activities.

  4. Mitigation – to prevent the aggravation of the situation and eradicates cyber threats in a timely manner to alleviate their impact on business operations and services.

  5. Restoration – to repair and restore systems or assets affected by a cyber incident to safely resume business-as-usual delivery of impacted services.

  6. Improvement – to establish processes to improve response and recovery capabilities through lessons learnt from past cyber incidents and from proactive tools, such as tabletop exercises, tests and drills.

  7. Coordination and communication – to coordinate with stakeholders to maintain good cyber situational awareness and enhances the cyber resilience of the ecosystem.

Responses to this the consultation report should be sent to [email protected] by Monday 20 July 2020. An optional template for submitting responses to optional guiding questions can be downloaded here. Responses to the consultation should be sent to [email protected] with “CIRR” in the e-mail subject line. Responses will be published on the FSB website unless respondents expressly request otherwise. The final toolkit, taking on board feedback from public consultation, will be published in October 2020.

FSB consults on effective practices for cyber incident response and recovery

Press enquiries:
+41 61 280 8138
[email protected]
Ref no: 13/2020

The Financial Stability Board (FSB) today published a consultation report on Effective Practices for Cyber Incident Response and Recovery, which was sent to G20 Finance Ministers and Central Bank Governors for their virtual meeting on 15 April. The toolkit of effective practices aims to assist financial institutions in their cyber incident response and recovery activities.

Cyber incidents pose a threat to the stability of the global financial system. In recent years, there have been a number of major cyber incidents that have significantly impacted financial institutions and the ecosystems in which they operate. A major cyber incident, if not properly contained, could seriously disrupt financial systems, including critical financial infrastructure, leading to broader financial stability implications.

Efficient and effective response to and recovery from a cyber incident by organisations in the financial ecosystem are essential to limiting any related financial stability risks. Such risks could arise, for example, from interconnected information technology systems between multiple financial institutions or between financial institutions and third-party service providers, from loss of confidence in a major financial institution or group of financial institutions, or from impacts on capital arising from losses due to the incident. The toolkit lists 46 effective practices, structured across seven components:

  1. Governance – frames how cyber incident and recovery is organised and managed.

  2. Preparation – to establish and maintain capabilities to respond to cyber incidents, and to restore critical functions, processes, activities, systems and data affected by cyber incidents to normal operations.

  3. Analysis – to ensure effective response and recovery activities, including forensic analysis, and to determine the severity, impact and root cause of the cyber incident to drive appropriate response and recovery activities.

  4. Mitigation – to prevent the aggravation of the situation and eradicates cyber threats in a timely manner to alleviate their impact on business operations and services.

  5. Restoration – to repair and restore systems or assets affected by a cyber incident to safely resume business-as-usual delivery of impacted services.

  6. Improvement – to establish processes to improve response and recovery capabilities through lessons learnt from past cyber incidents and from proactive tools, such as tabletop exercises, tests and drills.

  7. Coordination and communication – to coordinate with stakeholders to maintain good cyber situational awareness and enhances the cyber resilience of the ecosystem.

The FSB welcomes comments and responses to the questions set out in the consultation report, by Monday 20 July 2020. The final toolkit, taking on board the feedback from this public consultation, will be sent to the October G20 Finance Ministers and Central Bank Governors meeting and published.

Notes to editors

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, Vice Chairman, US Federal Reserve; its Vice Chair is Klaas Knot, President of De Nederlandsche Bank. The FSB Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements.

Toronto Centre virtual executive panel on COVID-19: Supervising the New Normal

17 April 2020

 

Toronto Centre virtual executive panel on COVID-19: Supervising the New Normal, recorded on 17 April 2020. Panellists discussed how to maintain global financial stability, keep markets open and functioning, and preserve the financial system’s capacity to finance growth, as the COVID-19 epidemic unfolds. They also discussed developments with “global stablecoins” including the FSB’s consultation on addressing the regulatory, supervisory and oversight challenges raised by “global stablecoin” arrangements.

With Ceyla Pazarbasioglu (Vice President for Equitable Growth, Finance and Institutions, World Bank Group), Tobias Adrian (Financial Counsellor and Director for Monetary and Capital Markets, International Monetary Fund), Dietrich Domanski (Secretary General, FSB), Ross Lecklow (Senior Adviser FinTech, Innovation Hub, Bank for International Settlements), and moderated by Aditya Narain, Deputy Director, Monetary and Capital Markets, International Monetary Fund.