FSB Americas group discusses regional vulnerabilities, market fragmentation, SME finance and correspondent banking

17 May 2019

Press enquiries:
+41 61 280 8138
[email protected]
Ref no: 13/2019

The Financial Stability Board (FSB) Regional Consultative Group (RCG) for the Americas met in Buenos Aires today at a meeting hosted by the Central Bank of Argentina. FSB Chair Randal K. Quarles joined RCG members for the meeting.

The group received an update on the FSB’s work programme and the deliverables to the June G20 meetings in Japan. The FSB’s work programme in 2019 is focused on new and emerging vulnerabilities and how they may be addressed; finalising and operationalising post-crisis reforms; evaluating the effects of the reforms; and enhancing the FSB’s transparency and external outreach.

Members received an update on the RCG’s working group on non-bank financial intermediation (NBFI) which annually surveys NBFI trends and developments in the region. The RCG discussed the outcomes of the last meeting of the working group held on 19 March, and the future work to be undertaken by the working group.

The group then discussed global and regional financial market developments and vulnerabilities, their potential impact on the economies in the region and possible policy responses. They were briefed on the FSB’s recent assessment of global vulnerabilities, which had noted with concern the loosening in lending standards, elevated asset values, and high private and public debt.

Members of the group discussed the FSB’s ongoing work on market fragmentation. Coordinated action by financial authorities in the aftermath of the global financial crisis has strengthened the global financial system. However, there are concerns that some markets have become fragmented along jurisdictional lines. RCG members discussed the FSB’s draft report on potential issues around market fragmentation and approaches to address them, and exchanged experiences on fragmentation issues in the region.

Members of the group discussed progress in implementation of the FSB-coordinated action plan to assess and address the decline in correspondent banking relationships and follow-up to the associated recommendations to address remittance service providers’ access to banking services. They emphasised the importance of this issue for many countries in the region.

The group provided feedback on the FSB’s draft consultation report on its evaluation of the effects of the post-crisis financial regulatory reforms on financing for small and medium-sized enterprises (SMEs), which will be published in the coming weeks. The report is the latest in a series of FSB evaluations of the effects of the reforms; it will be followed by an evaluation, to be completed in 2020, of the effects of reforms designed to end too-big-to-fail for banks.

Finally, the meeting provided an opportunity for FSB Chair Quarles to hear suggestions from members about how to enhance the ways that the RCGs provide feedback to the FSB. This year the FSB is conducting a review, with the involvement of members of the FSB’s six RCGs, of how to enhance the effectiveness of RCGs as an outreach and feedback mechanism.

The FSB RCG for the Americas is co-chaired by Guido Sandleris, Governor, Central Bank of Argentina and John Rolle, Governor, Central Bank of The Bahamas. Membership includes financial authorities from Argentina, Bahamas, Barbados, Bermuda, Bolivia, Brazil, British Virgin Islands, Canada, Cayman Islands, Chile, Colombia, Costa Rica, Guatemala, Honduras, Jamaica, Mexico, Panama, Paraguay, Peru, Trinidad and Tobago, the United States of America and Uruguay.

Notes to editors

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 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.

  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. [←]

Europe RCG discusses artificial intelligence, financial vulnerabilities and FSB work programme

9 May 2019

Press enquiries:
+41 61 280 8138
[email protected]
Ref no: 12/2019

The Financial Stability Board (FSB) Regional Consultative Group (RCG) for Europe met in Bucharest at a meeting hosted by the National Bank of Romania on 7 May. The meeting started with an address from Mugur Isărescu, Governor of the National Bank of Romania.

The group considered implications of the growing use of artificial intelligence, machine learning and big data for the regulation and supervision of the financial system. Recognising that these innovations are important drivers of change for the financial industry, members explored risks and opportunities that these innovations could entail for financial stability.

Members of the RCG then discussed global and regional financial vulnerabilities and their potential impact on European economies. While financial markets have functioned robustly during the period of volatility in late 2018 and near-term conditions in emerging markets have stabilised, members highlighted potential financial stability risks against the backdrop of rising debt levels, the weakening of lending standards in some markets, and continued global political uncertainty. The group also exchanged views on possible policy responses, including assessments of potential vulnerabilities linked to high global indebtedness and more specifically to the markets for leveraged loans and collateralised loan obligations (CLOs). The meeting considered the steps authorities are taking to address identified risks.

The group received an update on the FSB’s work programme and the deliverables to the June G20 meetings in Japan. The FSB’s work programme in 2019 is focused on new and emerging vulnerabilities, including potential financial stability issues arising from market fragmentation and from FinTech, and how they may be addressed; finalising and operationalising post-crisis reforms; evaluating the effects of the reforms on, for example, financing to small and medium-sized enterprises; and correspondent banking.

Finally, members discussed ways to enhance the effectiveness of RCG groups. As part of the FSB’s broader efforts to strengthen external stakeholder outreach, the discussion will help to identify ways in which jurisdictions that are not members of the FSB can effectively contribute to the FSB’s work and provide feedback on its direction.

The RCG Europe is co-chaired by Luigi Federico Signorini, Deputy Governor, Bank of Italy and Marek Mora, Deputy Governor, Czech National Bank. 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 and the ECB Banking Supervision also attended the meeting.

Notes to editors

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 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.

  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. [←]

FSB RCG for the MENA discusses market fragmentation, reforms to interest rate benchmarks and financial stability surveillance frameworks

4 May 2019

Press enquiries:
+41 61 280 8138
[email protected]
Ref no: 11/2019

The Financial Stability Board (FSB) Regional Consultative Group (RCG) for the Middle East and North Africa (MENA) met in Istanbul today at a meeting hosted by the Central Bank of the Republic of Turkey.

Members of the FSB RCG MENA received an update on the FSB’s work programme and deliverables to the June G20 meetings next month in Japan. The FSB’s work programme in 2019 is focused on new and emerging vulnerabilities, including potential financial stability issues arising from market fragmentation and FinTech, and how they may be addressed; finalising and operationalising post-crisis reforms; evaluating the effects of the reforms on, for example, financing to small and medium-sized enterprises; correspondent banking; and reinforcing outreach to stakeholders.

Turning to vulnerabilities and regional financial stability issues, meeting participants discussed risks associated with a loosening of credit standards and political uncertainties. At the same time, they noted that resilience in the financial system appears to have increased, financial markets are functioning robustly and near-term conditions in emerging markets have stabilised. From a regional perspective, members discussed the potential impact of trade issues and changes in commodities prices.

Members next considered market fragmentation and its impact on financial stability, including inefficiencies, deviations in prices and pools of liquidity and capital that are unable to move freely in times of stress. The group discussed causes of market fragmentation, such as cross-country differences in information requirements and ring fencing by national authorities, and possible approaches to address it, including considering fragmentation more systematically as part of implementation monitoring and greater supervisory cooperation.

The group discussed reforms to major interest rate benchmarks. Attempted market manipulation, false reporting and declining liquidity in the earlier part of this decade had led to a decline in confidence surrounding their reliability and robustness. Members exchanged experiences on the use of LIBOR in their financial systems and whether financial institutions will be ready for its discontinuation in 2021.

The group discussed financial stability surveillance frameworks to identify, assess and address new and emerging risks to financial stability. They exchanged views on the elements of such frameworks and their need to be forward looking and proactive, while at the same time being sufficiently flexible to capture new and emerging risks. Frameworks used by authorities in Qatar and Morocco served as useful examples.

Finally, members discussed ways in which the FSB’s outreach through its RCGs could be strengthened. This would include, for example, promoting continued seniority of representation within the RCGs and encouraging non-FSB members to make contributions and give feedback on the direction of the FSB’s work.

The RCG for the MENA is co-chaired by Murat Çetinkaya, Governor of the Central Bank of the Republic of Turkey, and Abdulla Saoud Al-Thani, Governor of the Qatar Central Bank. Membership includes financial and regulatory authorities from Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Morocco, Oman, Qatar, Saudi Arabia, Tunisia, Turkey and the United Arab Emirates.

Notes to editors

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 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.

  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. [←]

Sub-Saharan Africa group meets to discuss FSB activities, regulatory developments and financial vulnerabilities

3 May 2019

Press enquiries:
+41 61 280 8138
[email protected]
Ref no: 10/2019

The Financial Stability Board (FSB) Regional Consultative Group (RCG) for Sub-Saharan Africa held a meeting on 2-3 May in Balaclava, Mauritius, hosted by the Bank of Mauritius.

The RCG started with a discussion about the FSB’s work programme and activities for 2019. Members considered the FSB’s work to address new and emerging vulnerabilities in the financial system including FinTech developments and cyber resilience. RCG members were updated on the FSB’s work to evaluate the effects of the post-crisis reforms, in particular an ongoing evaluation of the impact on financing of small and medium-sized enterprises.

The meeting then discussed the work the FSB is undertaking that looks at examples of financial activities where supervisory practices and regulatory policies may give rise to market fragmentation. Members of the group discussed the preliminary conclusions from the work and issues that may be of relevance to the region.

Members discussed ways to improve the effectiveness of the RCGs as part of the FSB’s broader effort to enhance engagement with stakeholders. The discussion will feed into the FSB’s ongoing work to consider ways in which jurisdictions that are not members of the FSB can contribute to the direction of the FSB’s work.

The meeting further discussed global and regional macroeconomic and financial market developments. Members highlighted potential financial stability risks against the backdrop of rising public debt levels, weakening of fiscal and external buffers, trade tensions, risks associated with sharp increases in the cost of credit and the high level of political uncertainties, and exchanged views on possible policy responses.

The RCG then considered issues and implementation challenges for developing countries that choose to implement the Basel framework. Members acknowledged the specific characteristics of the countries in the region which need to be carefully considered when designing their own regulatory framework.

The meeting concluded with a discussion on the use of cloud computing in the financial sector. While adoption by regulated financial institutions appears to have been limited, anecdotal evidence suggests this is changing. Members of the group discussed risks such as the sharing of sensitive data, the cross-border nature of service provision and the concentration of cloud service providers as risks that supervisors need to consider. The RCG discussed regulatory frameworks for outsourcing to cloud service providers including governance, risk management and information security.

The FSB RCG for Sub-Saharan Africa is co-chaired by Lesetja Kganyago, Governor, South African Reserve Bank and Moses Pelaelo, Governor, Bank of Botswana. 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.

Notes to editors

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 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.

  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. [←]

FSB designates DSB as Unique Product Identifier (UPI) Service Provider

2 May 2019

Press enquiries:
+41 61 280 8138
[email protected]
Ref no: 9/2019

At its meeting on 26 April in New York, the FSB designated The Derivatives Service Bureau (DSB) Ltd (DSB) as the service provider for the future UPI system. This is a key step in completing the governance framework for the UPI. As the sole issuer of UPI codes, DSB will also perform the function of operator of the UPI reference data library.

A UPI will be assigned to an over-the-counter (OTC) derivatives product and used for identifying the product in transaction reporting data. This will enable authorities to aggregate data on OTC derivatives transactions by product or by any UPI reference data element. Such aggregation will facilitate the effective use of OTC trade reporting data, including helping authorities assess systemic risk and detect market abuse.

The designation of DSB comes after the FSB publicly invited prospective UPI service providers in July 2018 to submit self-assessments.1 It is based on an assessment process undertaken by the FSB’s Working Group on Unique Transaction Identifier (UTI) and UPI Governance (GUUG), with advice from the Technical Assessment Sub-Group of the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) working group for the harmonisation of key OTC derivatives data elements.

The FSB has also decided that the data standard for the UPI code and the UPI reference data elements will be set as international data standards and has identified the International Organization for Standardization (ISO) as the body responsible for publishing and maintaining these standards as international data standards.

In the coming period, the FSB, through the GUUG, will also engage with DSB and a range of authorities to ensure that DSB is subject to appropriately rigorous oversight arrangements and that its existing governance and consultative systems are adapted to the specific features of the UPI system, as set out in the FSB’s governance criteria and the CPMI and IOSCO technical guidance.

Notes to editors

DSB, a United Kingdom registered company, is a subsidiary of the Association of National Numbering Agencies (ANNA). ANNA monitors national numbering agencies for compliance with various standards on behalf of ISO and has substantial background with other financial identifiers. DSB generates ISO 6166 International Securities Identification Numbers (ISINs) for OTC derivatives. DSB is a numbering agency designed to operate on a global basis.

G20 Leaders agreed at the Pittsburgh Summit in 2009, as part of a package of reforms to the OTC derivatives markets, that all OTC derivatives transactions should be reported to trade repositories (TRs). A lack of transparency in these markets was one of the key problems identified by the financial crisis. Trade reporting, by providing authorities with data on trading activity, is a key part of efforts to identify and address financial stability risks from these markets.

The final report of the FSB’s Aggregation Feasibility Study published in September 2014 recommended a number of key preparatory steps that should be undertaken to enable effective global aggregation of OTC derivatives trade reporting data. In particular, the study noted that, irrespective of decisions on global aggregation, it is important that the work on standardisation and harmonisation of important data elements be completed, including the creation of a UPI and UTI, and the global introduction of a legal entity identifier (LEI). The study noted that these steps would also provide broader benefits for the reporting and usability of TR data, beyond the benefit of permitting authorities to aggregate data globally.2

The FSB noted in its work programme for 2019 that finalising governance arrangements for the UPI, and identification of one or more UPI service providers by mid-2019 would prepare for FSB further consideration in 2020 of the potential development of a global aggregation mechanism for trade reporting.

The UPI technical guidance was issued by CPMI and IOSCO in 2017 (UPI Technical Guidance).3

The FSB set out the key governance criteria and governance functions in the Explanatory Note to the self-assessment for prospective UPI service providers, published in July 2018.4

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.

  1. FSB (July 2018), Self-assessment questionnaire for prospective UPI Service Providers. [←]
  2. FSB (2014), Feasibility study on approaches to aggregate OTC derivatives data. [←]
  3. See CPMI and IOSCO (2017), Technical Guidance: Harmonisation of the Unique Product Identifier. [←]
  4. FSB (July 2018), Self-assessment questionnaire for prospective UPI Service Providers. [←]

Guidance on Deposit Insurers’ Role in Contingency Planning and System-wide Crisis Preparedness and Management

1 May 2019

View the Standard

The Core Principles for Effective Deposit Insurance Systems issued by the International Association of Deposit Insurers (IADI) outline the roles and responsibilities of the deposit insurer in contingency planning and crisis preparedness and management (Core Principle 6). Depending on the design of the institutional and regulatory framework in a jurisdiction, the mandates of deposit insurers may differ. However, there are elements of contingency planning and crisis preparedness and management that are applicable to all deposit insurers.

Deposit insurers need to engage in a variety of preparatory activities aimed at identifying and preparing for events that may affect normal functioning. Contingency planning or crisis preparedness exercises enable the testing of the effectiveness of plans to handle extraordinary situations and seek to ensure that the deposit insurer can perform the role according to its mandate in the event of a system-wide crisis.

This Guidance Paper reviews current practices among IADI members and provides a direction for the implementation and strengthening of deposit insurers’ contingency planning and crisis preparedness and management frameworks. It is recognised, however, that such direction cannot be uniform for all deposit insurers, but will need to be tailored according to their mandate and the legal framework in each jurisdiction.

Thematic Peer Review on Bank Resolution Planning

29 April 2019 | PDF full text (1,006 KB)

This report forms part of a series of peer reviews to support timely and consistent implementation of the FSB’s Key Attributes of Effective Resolution Regimes for Financial Institutions. The Key Attributes set out the core elements of effective resolution regimes that allow authorities to resolve financial institutions in an orderly manner without taxpayer exposure to loss, while maintaining continuity of their vital economic functions.

The peer review evaluates the implementation by FSB jurisdictions of the resolution planning standard as set out in the Key Attributes and in associated guidance. It focuses on resolution planning for all domestically incorporated banks that could be systemically significant or critical if they fail (‘systemic in failure’).

The peer review finds that bank resolution planning frameworks have been adopted in most FSB jurisdictions, with planning most advanced for global systemically important banks (G-SIBs) and in jurisdictions that are home to them. The range of banks subject to resolution planning varies widely and some of the requirements – for example, the frequency of resolution plan review, data reporting and the content of plans – also tend to vary, particularly for banks other than G-SIBs or domestic systemically important banks (D-SIBs).

Notwithstanding the progress made to date, the review stresses that important work remains to ensure that bank resolution plans can be put fully into effect and sets out recommendations:

  • For FSB jurisdictions to take further steps to adopt and operationalise their resolution planning framework. This includes having powers to require banks to take measures to improve their resolvability; developing playbooks for executing resolution strategies; advancing work on resolution funding and valuation; and enhancing resolution-related cross-border cooperation and information sharing arrangements. Those jurisdictions identified in the report as not having a resolution planning framework should report to the FSB by June 2020 on actions undertaken, or planned, to adopt such a framework.
  • For the FSB to undertake work to support member authorities’ resolution planning for banks other than G-SIBs that could be systemic in failure.
  • For the FSB, working with relevant authorities and other bodies, to promote the sharing of bank resolution planning experiences and practices in enhancing cooperation and information-sharing arrangements, particularly for non-G-SIBs and with non-crisis management group (CMG) host jurisdictions for G-SIBs.

FSB publishes peer review on bank resolution planning

Press enquiries:
+41 61 280 8138
[email protected]
Ref no: 8/2019

The Financial Stability Board (FSB) published today a Thematic Review on Bank Resolution Planning. This report forms part of a series of peer reviews to support timely and consistent implementation of the FSB’s Key Attributes of Effective Resolution Regimes for Financial Institutions. The Key Attributes set out the core elements of effective resolution regimes that allow authorities to resolve financial institutions in an orderly manner without taxpayer exposure to loss, while maintaining continuity of their vital economic functions.

The peer review evaluates the implementation by FSB jurisdictions of the resolution planning standard as set out in the Key Attributes and in associated guidance. It focuses on resolution planning for all domestically incorporated banks that could be systemically significant or critical if they fail (‘systemic in failure’).

The peer review finds that bank resolution planning frameworks have been adopted in most FSB jurisdictions, with planning most advanced for global systemically important banks (G-SIBs) and in jurisdictions that are home to them. The range of banks subject to resolution planning varies widely and some of the requirements – for example, the frequency of resolution plan review, data reporting and the content of plans – also tend to vary, particularly for banks other than G-SIBs or domestic systemically important banks (D-SIBs).

Notwithstanding the progress made to date, the review stresses that important work remains to ensure that bank resolution plans can be put fully into effect and sets out recommendations:

  • For FSB jurisdictions to take further steps to adopt and operationalise their resolution planning framework. This includes having powers to require banks to take measures to improve their resolvability; developing playbooks for executing resolution strategies; advancing work on resolution funding and valuation; and enhancing resolution-related cross-border cooperation and information sharing arrangements. Those jurisdictions identified in the report as not having a resolution planning framework should report to the FSB by June 2020 on actions undertaken, or planned, to adopt such a framework.
  • For the FSB to undertake work to support member authorities’ resolution planning for banks other than G-SIBs that could be systemic in failure.
  • For the FSB, working with relevant authorities and other bodies as appropriate, to promote the sharing of bank resolution planning experiences and practices in enhancing cooperation and information-sharing arrangements, particularly for non-G-SIBs and with non-crisis management group (CMG) host jurisdictions for G-SIBs.

Lesetja Kganyago, Governor of the South African Reserve Bank and Chairman of the FSB’s Standing Committee on Standards Implementation (SCSI) that oversaw the preparation of the peer review, said “Resolution reforms are a critical component of the policy framework for addressing the too-big-to-fail problem. The findings of the peer review provide a good baseline to monitor developments, and its recommendations will maintain the momentum for reform.”

Stefan Gannon, Commissioner of the Resolution Office at the Hong Kong Monetary Authority (HKMA) and Chair of the peer review team, said “Important steps have been taken in recent years by FSB jurisdictions to establish resolution planning frameworks and operationalise resolution strategies. But much work is still needed, both by member authorities and by the FSB to ensure effective implementation of the Key Attributes in this area.”

Notes to editors

The FSB began a regular programme of peer reviews in 2010, consisting of thematic reviews and country reviews. The objectives of thematic reviews are: to encourage consistent cross-country and cross-sector implementation; to evaluate (where possible) the extent to which standards and policies have had their intended results; and to identify gaps and weaknesses in reviewed areas and to make recommendations for potential follow-up (including through the development of new standards) by FSB members. The objectives and guidelines for the conduct of these reviews are set out in the Handbook for Peer Reviews.

The peer review on bank resolution planning is the third thematic peer review on resolution regimes and the fourteenth thematic review conducted by the FSB. The report published today describes the findings of this review, including the key elements of the discussion in the FSB SCSI. The draft report was prepared by a team of experts drawn from FSB member institutions and led by Stefan Gannon, Commissioner of the Resolution Office at the HKMA.

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.

FSB Plenary meets in New York

26 April 2019

Press enquiries:
+41 61 280 8138
[email protected]
Ref no: 7/2019

The FSB Plenary met in New York today to discuss vulnerabilities in the global financial system and progress under its 2019 work programme, including deliverables for the June G20 meetings in Japan.

Current vulnerabilities in the global financial system

The Plenary discussed the financial stability implications of recent developments in global financial markets. Market sentiment has improved since the start of the year and financial conditions have eased, after the sharp decline in the prices of various financial assets during the fourth quarter of 2018. Uncertainties remain elevated, but some immediate concerns have receded, including following the extension to the deadline for the United Kingdom’s withdrawal from the European Union. Financial markets generally functioned well during the period of volatility at the end of 2018. Nonetheless, the FSB recognised that a more severe and protracted stress event could test the resilience of the financial system. The FSB therefore remains vigilant about the loosening seen in lending standards, elevated asset values, and high private and public debt.

The core of the financial system is considerably more resilient than it was a decade ago. Potential vulnerabilities in the financial system persist, however, and in some cases have built up further and policy space is limited. There are questions as to the extent of financial institutions’ exposures to riskier credit instruments, including leveraged loans, directly and through collateralised loan obligations (CLOs). While CLO structures appear to be more robust now than before the global financial crisis, leveraged loan credit quality has deteriorated over the past few years and it remains unclear whether CLO prices are aligned with risk. The FSB is closely monitoring these markets and members will further examine information on the pattern of exposures to these assets in the coming months to deepen its analysis of potential vulnerabilities.

FSB surveillance framework

The Plenary discussed a new initiative to develop an FSB surveillance framework. The assessment of vulnerabilities in the global financial system is a core element of the FSB’s mandate, and the completion of the main post-crisis reforms reinforces the importance of vigilant monitoring. The new framework will support the comprehensive, methodical and disciplined review of potential vulnerabilities, and help the FSB to identify and address new and emerging risks to financial stability.

Market fragmentation

International cooperation and coordinated action by financial authorities have strengthened the global financial system in the aftermath of the global financial crisis. The FSB discussed a draft report that looks at examples of financial activities where supervisory practices and regulatory policies may give rise to market fragmentation and potential trade-offs between the benefits of increased cross-border activity and a need to tailor domestic regulatory frameworks to local conditions and mandates. Examples include the trading and clearing of over-the-counter (OTC) derivatives across borders; banks’ cross-border management of capital and liquidity; and the sharing of data and other information internationally.

The report, which includes a discussion of approaches and mechanisms that may enhance the effectiveness and efficiency of international cooperation, will be published and submitted to the June meeting of G20 Finance Ministers and Central Bank Governors.

Review of the implementation of the TLAC standard

The Plenary discussed a report on the implementation of the total-loss absorbing capacity (TLAC) standard. The TLAC standard was developed as part of the FSB’s work to end the risk of global systemically important banks (G-SIBs) being considered too-big-to-fail. The standard seeks to ensure the availability of appropriate amounts of loss-absorbing capacity at the right locations within a G-SIB’s group structure to provide home and host authorities with confidence that G-SIBs can be resolved in an orderly manner. The report will be published in June.

Evaluating the effects of financial reforms

The Plenary discussed the draft findings of the evaluation of the effects of financial regulatory reforms on the financing of small and medium-sized enterprises. The evaluation is part of a broader examination of the effects of the post-crisis reforms on financial intermediation. The draft report will be delivered to the G20 meetings in Japan and issued for public consultation in June. The final report, incorporating public feedback, will be published in November.

The Plenary also approved the terms of reference for the evaluation of the effects of too-big-to-fail (TBTF) reforms. The evaluation will assess whether the implemented reforms are reducing the systemic and moral hazard risks associated with systemically important banks. It will also examine the broader effects of the reforms to address TBTF for systemically important banks on the overall functioning of the financial system. Stakeholder outreach will be an important aspect of the evaluation, including through an initial call for public feedback on the effects of the TBTF reforms and through workshops to exchange views on this topic. The FSB will publish a draft report for public consultation in June 2020 and will publish the final report, taking into account consultation responses, in late 2020.

Financial innovation

The Plenary discussed the different initiatives under way at standard-setting bodies to address risks from crypto-assets and any possible gaps in this work. The FSB’s work on crypto-assets has focused on two areas: monitoring of the financial stability implications and a directory of crypto-asset regulators. Members took note of the continued rapid evolution of crypto-asset markets and the need for continued monitoring of developments. The FSB will publish an update on the work of the standard-setting bodies and will deliver it to the June meeting of G20 Finance Ministers and Central Bank Governors.

More generally, the FSB is exploring financial stability, regulatory and governance implications of decentralised financial technologies. The FSB will publish its report to the G20 on this subject in June.

Response to and recovery from a cyber incident

Cyber incidents have the potential to pose a threat to the stability of the global financial system. The FSB agreed last October to develop a toolkit of effective practices, which will assist financial institutions, as well as supervisors and other relevant authorities in supporting financial institutions, before, during and after a cyber incident. The Plenary discussed a draft of an initial progress report, which will be published and submitted to the June meeting of G20 Finance Ministers and Central Bank Governors. The toolkit will be subject to public consultation in early 2020.

Unique Product Identifier (UPI) and Legal Entity Identifier (LEI)

Plenary members discussed the designation of an entity/entities that will issue UPI codes and operate the UPI reference data library, following an assessment process launched in July 2018. An announcement concerning the designation will be made shortly.

G20 Leaders at the 2012 Los Cabos Summit endorsed the FSB’s recommendations for the development of a global LEI system and encouraged global adoption of the LEI to support authorities and market participants in identifying and managing financial risks. The Plenary discussed at its meeting today the draft report of its thematic peer review of FSB member authorities’ implementation of the LEI, which will be published in the coming weeks. The report will reaffirm the FSB’s commitment to a broader use of LEIs globally.

Addressing the decline in correspondent banking relationships

The Plenary noted with concern the continued decline in the number of correspondent banking relationships. It discussed a progress report on the implementation of the FSB’s action plan, including international guidance to clarify regulatory expectations, coordination of technical assistance and strengthening tools for due diligence.

The reduction in correspondent banking relationships has had a significant impact on remittance service providers’ ability to access banking services, particularly acute in those developing countries where remittance flows are a key source of funds for households. Plenary members reviewed a draft report to the G20 that follows up on the FSB’s March 2018 recommendations on remittance service providers’ access to banking services.

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.