FSB publishes review of TLAC Standard

2 July 2019

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Ref no: 28/2019

The Financial Stability Board (FSB) today published a technical review  of the implementation of the Total Loss-Absorbing Capacity (TLAC) Standard for Global Systemically Important Banks (G-SIBs) in resolution. When fully implemented, the TLAC Standard will promote financial stability by providing confidence that G-SIBs have appropriate capacity to absorb losses and, if necessary, to achieve an orderly resolution and to maintain the continuity of critical functions.

The review concludes that progress has been steady and significant in both the setting of external TLAC requirements by authorities and the issuance of TLAC by G-SIBs. All relevant G-SIBs meet or exceed the TLAC target ratios of at least 16% of risk-weighted assets and 6% of the Basel III leverage ratio denominator. Estimates of G-SIB issuances of TLAC range between USD 350 and 400bn per year for the past three years, in a variety of market conditions. As of 2018, most TLAC had been issued in USD (about 67%) and EUR (about 19%).

The FSB sees no need to modify the TLAC Standard at this time. However, as implementation is ongoing, further efforts are needed to implement the TLAC Standard fully and effectively and to determine the appropriate group-internal distribution of TLAC resources across home and host jurisdictions.

Mark Branson, Chair of the FSB Resolution Steering Group and CEO of the Swiss Financial Market Supervisory Authority FINMA, said: “The successful build-up of loss-absorbing capacity has enhanced the resolvability of G-SIBs and strengthened market belief that too-big-to-fail risks have been reduced. However, the job is not complete. Important challenges remain, particularly in ensuring that, in a crisis, TLAC will be available in the right amounts at all locations within a group.”

The FSB will continue to monitor implementation of the TLAC Standard and issuance of TLAC instruments and report at least annually on progress. To support the effective implementation of the TLAC Standard it will take stock of the range of practices of authorities and Crisis Management Groups in implementing the TLAC Standard, particularly with respect to internal TLAC pre-positioning, the management of non-pre-positioned TLAC and authorities’ approaches as regards the review of the TLAC-eligibility of instruments and their subordination.

Notes to editors

When the FSB adopted the TLAC standard in 2015, it made a commitment to examine in 2019 whether implementation is proceeding in a manner consistent with the agreed timelines and objectives as set out in the TLAC Standard; and to identify any technical issues or operational challenges that authorities or firms encounter in the implementation of the standard. The review was informed by surveys of the home and host authorities of G-SIBs, responses to a call for public feedback and discussions with stakeholders at a roundtable organised by the FSB in September 2018.

The FSB is currently publicly consulting on how general and firm-specific disclosures on resolution planning and resolvability could be further enhanced, focusing mainly on disclosures of resolution planning for G-SIBs.

In June the FSB published a report on market fragmentation which included an examination of banks’ cross-border management of capital and liquidity. In response to this report the FSB noted that it will focus on facilitating further analysis and discussion of approaches and mechanisms for more efficient and effective cross-border cooperation amongst authorities. Further work will include strengthening the understanding of approaches by supervisory and resolution authorities towards pre-positioning of capital and liquidity by international banks. In May the FSB also launched an evaluation of the effects of the too-big-to-fail reforms for banks that were agreed by the G20 in the aftermath of the global financial crisis. The FSB will issue a public consultation on this evaluation in June 2020 and will publish the final report in late 2020.

The FSB Resolution Steering Group leads the FSB’s work on resolution regimes, resolution planning, and resolvability assessments for all sectors and developed the Key Attributes of Effective Resolution Regimes for Financial Institutions.

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 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.

OECD Recommendation on Consumer Protection in the field of Consumer Credit

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The OECD Recommendation on Consumer Protection in the field of Consumer Credit was updated in July 2019 following a consultative and iterative process of review. Access to affordable consumer credit is a vital part of a modern and inclusive financial system, and enables consumers to achieve many of their goals and objectives. At the same time, it is important that consumer credit is provided fairly and responsibly as far as possible to help avoid over-indebtedness, financial exclusion and related problems, which are detrimental for both consumers and businesses.

The Recommendation sets out a comprehensive set of measures for the effective regulation and supervision of consumer credit transactions in order to promote fair outcomes for consumers and businesses alike. Following the High-Level Principles on Financial Consumer Protection it sets out measures relating to the role of oversight bodies and recommended disclosure requirements relating to the sale of consumer credit products. In addition, it includes recommended measures relating to fair treatment of consumers to help avoid over-indebtedness and responsible business conduct including responsible lending requirements, provisions relating to credit scoring, product features, debt collection and treatment of vulnerable consumers. It also sets out recommended measures relating to protection of consumer data and access to complaints handling mechanisms.

The Recommendation is open to adherence by OECD Members and non-Members. While not legally binding, practice accords it great moral force as representing the political will of OECD Members and non-Members having adhered to it (Adherents), on whom there is an expectation to do their utmost to fully implement it.

Public responses to the call for public feedback on the evaluation of too-big-to-fail reforms

27 June 2019

On 23 May 2019, the FSB published a summary Terms of Reference and a call for public feedback on its evaluation of too-big-to-fail reforms. Interested parties were invited to provide written responses by 21 June 2019. These responses are available below. The feedback will be considered by the FSB as it prepares the draft report, which will be issued for public consultation in June 2020. The final report will be published in late 2020.

Responses received

The FSB thanks those who have taken the time and effort to express their views.

Guidance for a risk-based approach for trust and company service providers

26 June 2019

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The FATF risk-based approach (RBA) Guidance for trust and company service providers (TCSPs) aims to support the implementation of the RBA by the profession. The Guidance highlights the need for a sound assessment of the ML/TF risks that TCSPs face so that the policies, procedures and initial and ongoing client due diligence measures can mitigate these risks.

The Guidance is aimed at TCSP practitioners, countries and their competent authorities, including supervisors of TCSPs. In particular, it explains the obligation for TCSPs to identify and verify beneficial ownership information and provides examples of simplified, standard and enhanced CDD measures. 

The Guidance contains a section for supervisors of TCSPs. It explains the risk-based approach to supervision, as well as the supervision of the risk-based approach. The Guidance highlights the importance of supervision of beneficial ownership requirements in relation to a trust or other legal arrangement so that such information is maintained and available in a timely manner. 

Guidance for a risk-based approach for legal professionals

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The FATF risk-based approach (RBA) Guidance aims to support the implementation of the RBA by legal professionals, taking into account national ML/TF risk assessments and AML/CFT legal and regulatory frameworks. The Guidance highlights that legal professionals should design their policies and procedures so that the level of initial and ongoing CDD measures addresses the ML/TF risks to which they are exposed

The Guidance acknowledges that legal professionals operate within a wide range of business structures – from sole practitioners to large, multi-national firms and provide a variety of services in different jurisdictions. Given the diversity in scale, activities and risk profile one-size-fits-all approach is not appropriate.

The Guidance has a section for supervisors of legal professionals and highlights the role of self-regulatory bodies in supervising and monitoring. It explains the RBA to supervision as well as supervision of the RBA by providing specific guidance on licensing or registration requirements, on-site and off-site supervision, enforcement, training and information-exchange between the public and private sector.

Guidance for a risk-based approach for the accounting profession

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The FATF risk-based approach (RBA) Guidance is aimed at practitioners in the accountancy profession; countries and their competent authorities, practitioners in the banking sector, and other financial and designated non-financial sectors that rely on the customer due diligence performed by accountants.

The Guidance aims to support accounting professionals in the design of effective measures to manage their ML/TF risks, when establishing or maintaining business relationships. In particular, it clarifies the obligation for accountants to identify and verify beneficial ownership information. 

The Guidance contains a section for supervisors of the accounting profession. It explains the risk-based approach to supervision of this profession, as well as the supervision of the risk-based approach to ensure that accounting professionals manage their risks effectively. The Guidance highlights the importance of supervision of beneficial ownership requirements and nominee arrangements so that up-to-date information on legal persons and legal arrangements is maintained and available in a timely manner.

FSB Chair’s letter to G20 Leaders meeting in Osaka

25 June 2019 | PDF full text (397 KB)

This letter from the FSB Chair Randal K. Quarles to G20 Leaders ahead of their Summit in Osaka on 28-29 June 2019 sets out progress by the FSB over the past year in enhancing global financial stability and furthering the G20’s goals in a number of key themes:

  • Addressing new and emerging vulnerabilities – the FSB will remain vigilant in identifying emerging risks. Potential vulnerabilities persist and, in some cases, have built up further. Corporate and public debt levels have continued to rise. The FSB is closely monitoring leveraged loan and collateralised loan obligation markets in order to obtain a fuller picture of the pattern of exposures to these assets globally.

  • Harnessing the benefits of financial innovation while containing risks – a deep and early understanding of how technological innovation may transform financial institutions and markets is key for harnessing benefits while containing risks. One example is crypto-assets. A wider use of new types of crypto-assets for retail payment purposes would warrant close scrutiny by authorities to ensure that that they are subject to high standards of regulation. The FSB and standard-setting bodies will monitor risks very closely and in a coordinated fashion, and consider additional multilateral responses as needed.

  • Completing implementation of the agreed reforms and ensuring that the reforms work as intended – the implementation progress report published together with the letter shows that the new financial regulatory framework called for by the G20 is now largely in place. However, despite continued progress, implementation is not complete and remains uneven across reform areas. G20 Leaders’ continued support in implementing the agreed reforms is needed. Finalising post-crisis reforms and monitoring their effective implementation remains a focus of FSB work.

  • Promoting an integrated global financial system – an open and resilient financial system, grounded in agreed international standards, is crucial to support sustainable growth. The FSB’s report on market fragmentation identified several areas where further work may help to strengthen mechanisms and approaches to address market fragmentation through more efficient and effective cooperation going forward. This includes mechanisms to avoid future fragmentation.

  • Strengthening the FSB’s outreach and accountability – reaching out beyond its membership is key for the FSB to achieve its mandate of promoting global financial stability. The FSB is taking steps to improve communication and transparency, to facilitate wider input to the FSB’s work and increase understanding of what it does.

FSB Chair reports to G20 Leaders ahead of Osaka Summit

Press enquiries:
+41 61 280 8138
[email protected]
Ref no: 27/2019

The Financial Stability Board (FSB) today published FSB Chair Randal K. Quarles’ letter to G20 Leaders ahead of their Summit in Osaka on 28-29 June, together with a progress report on implementation of the G20 financial regulatory reforms.

The letter provided a number of key themes:

  • Addressing new and emerging vulnerabilities – the FSB will remain vigilant in identifying emerging risks. Potential vulnerabilities persist and, in some cases, have built up further. Corporate and public debt levels have continued to rise. The FSB is closely monitoring leveraged loan and collateralised loan obligation markets in order to obtain a fuller picture of the pattern of exposures to these assets globally.

  • Harnessing the benefits of financial innovation while containing risks – a deep and early understanding of how technological innovation may transform financial institutions and markets is key for harnessing benefits while containing risks. One example is crypto-assets. A wider use of new types of crypto-assets for retail payment purposes would warrant close scrutiny by authorities to ensure that that they are subject to high standards of regulation. The FSB and standard-setting bodies will monitor risks very closely and in a coordinated fashion, and consider additional multilateral responses as needed.

  • Completing implementation of the agreed reforms and ensuring that the reforms work as intended – the implementation progress report published together with the letter shows that the new financial regulatory framework called for by the G20 is now largely in place. However, despite continued progress, implementation is not complete and remains uneven across reform areas. G20 Leaders’ continued support in implementing the agreed reforms is needed. Finalising post-crisis reforms and monitoring their effective implementation remains a focus of FSB work.

  • Promoting an integrated global financial system – an open and resilient financial system, grounded in agreed international standards, is crucial to support sustainable growth. The FSB’s report on market fragmentation identified several areas where further work may help to strengthen mechanisms and approaches to address market fragmentation through more efficient and effective cooperation going forward. This includes mechanisms to avoid future fragmentation.

  • Strengthening the FSB’s outreach and accountability – reaching out beyond its membership is key for the FSB to achieve its mandate of promoting global financial stability. The FSB is taking steps to improve communication and transparency, to facilitate wider input to the FSB’s work and increase understanding of what it does.

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 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.

Progress in implementation of G20 financial regulatory reforms

| PDF full text (701 KB)

This summary implementation progress report was delivered to G20 Leaders ahead of their Summit in Osaka from 28-29 June 2019.

The report finds that the new financial regulatory framework called for by the G20 is now largely in place. Implementation is well underway, including further progress since the 2018 Summit. These reforms make the financial system more resilient, and thereby reduce the likelihood and severity – and associated public cost – of future financial crises. However, despite continued progress, implementation is not complete and remains uneven across reform areas. The challenges in meeting the agreed dates relate to domestic legislative or rule-making processes; concerns over the pace of implementation in other jurisdictions; and difficulties faced by regulated entities in adjusting to the new requirements. It is critical to maintain momentum and avoid complacency, in order to achieve the goal of greater resilience. The report calls for G20 Leaders’ continued support in implementing the agreed reforms. 

Implementation progress across the four core reform areas is as follows:

  • Building resilient financial institutions – Regulatory adoption of core Basel III elements has generally been timely, though implementation of some standards is behind schedule.

  • Ending too-big-to-fail – Implementation of the policy framework has advanced the most for global systemically important banks. However, substantial work remains in achieving effective resolution regimes and operationalising plans for systemically important banks and non-bank financial institutions.

  • Making derivatives markets safer – Overall good progress has been made to date across over-the-counter derivatives market reforms, though only one jurisdiction has reported further implementation progress since 2018.

  • Enhancing resilience of non-bank financial intermediation (NBFI) – Implementation of reforms to strengthen oversight and regulation of NBFI remains at an earlier stage than in other areas, in part reflecting later implementation deadlines.

The FSB continues to evaluate the effects of reforms and will identify and deliver adjustments where appropriate, without compromising on financial resilience.