FSB welcomes IAIS proposed insurance systemic risk framework and decides not to engage in an identification of G-SIIs in 2018

14 November 2018

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Ref no: 40/2018

The FSB welcomes the publication today of the International Association of Insurance Supervisors (IAIS) consultation document on a proposed holistic framework for the assessment and mitigation of systemic risk in the insurance sector. It sets out the Activities-Based Approach for sector-wide risk monitoring and management, as a key component of the framework, and tools for dealing with the build-up of risk within individual insurers. The FSB notes that a new holistic framework, appropriately implemented, would provide an enhanced basis for mitigating systemic risk in the insurance sector.

The IAIS will further refine the proposed holistic framework, taking account of the public consultation feedback, including feedback on the scope of application of the supervisory measures to ensure proportional application. The specific measures to be incorporated in the IAIS supervisory material (Insurance Core Principles and Common Framework for the Supervision of Internationally Active Insurance Groups, ComFrame) will then be exposed for further public consultation. The IAIS will finalise the holistic framework in 2019, for implementation in 2020.

In light of the progress with the proposed holistic framework, the FSB, in consultation with the IAIS and national authorities, has decided not to engage in an identification of global systemically important insurers (G-SIIs) in 2018. The FSB will assess the IAIS’s recommendation to suspend G-SII identification from 2020 once the holistic framework is finalised in November 2019. In November 2022, the FSB will, based on the initial years of implementation of the holistic framework, review the need to either discontinue or re-establish an annual identification of G-SIIs by the FSB in consultation with the IAIS and national authorities.

In the period until the holistic framework is implemented, the relevant group-wide supervisors have committed to continue applying existing enhanced supervisory policy measures as described in the IAIS consultative document on the holistic framework published today, as applicable.

The FSB will receive from the IAIS an annual update of the IAIS assessment of systemic risk in the global insurance sector and of the supervisory response. The IAIS will continue its annual global monitoring exercise, including the annual data collection from individual insurers building on the current G-SII data collection template and instructions and implement additional data collection from supervisors as necessary to support an assessment of sector-wide trends with regard to specific activities and exposures.

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 Mark Carney, Governor of the Bank of England. Its Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements.

Reforming major interest rate benchmarks: Progress report

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This progress report updates on implementation of its recommendations to reform major interest rate benchmarks. The report sets out the progress made on the development of overnight nearly risk-free rates (RFRs), and markets based on these rates, and on further reforms to interbank offered rates (IBORs).

Interest rate benchmarks play a key role in global financial markets. The FSB started its work on reforms to IBORs in response both to cases of attempted manipulation and to the decline in liquidity in key interbank unsecured funding markets. In 2014, the FSB set out recommendations to reform major interest rate benchmarks, such as key IBORs, and has been monitoring progress on implementation since then.

The progress report considers three key areas:

  • IBORs: Although LIBOR has been strengthened, authorities have warned that publication of LIBOR may cease once official sector support for the benchmark is withdrawn at end-2021. Work has continued among the other major IBORs (EURIBOR and TIBOR) to strengthen existing methodologies to make them more grounded in actual transactions, as well as to strengthen regulatory frameworks and supervision. In other jurisdictions, actions are also underway to implement further regulatory reforms.

  • Alternative reference rates: In the markets which face the disappearance of IBORs, notably markets currently reliant on LIBOR, there needs to be an orderly transition to new reference rates that are sufficiently robust for such extensive use. Since the 2017 progress report, a great deal of progress has been made to identify RFRs and other alternative reference rates in currency areas currently reliant on LIBOR benchmarks, as well as to plan for and in some markets begin to execute transition to those RFRs.

  • Enhancing contractual robustness: Significant work continues on the part of FSB member authorities, national working groups, the International Swaps and Derivatives Association and other trade associations on the important task of strengthening contractual robustness to the risk of discontinuation of major interest-rate benchmarks. This issue goes beyond derivatives markets and applies to many types of cash products including syndicated loans, bonds and mortgages.

The FSB will publish a further progress report in late 2019.

FSB publishes progress report on reforming major interest rate benchmarks

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Ref no: 39/2018 

The Financial Stability Board (FSB) today published its latest progress report on implementation of its recommendations to reform major interest rate benchmarks. The report sets out the progress made on the development of overnight nearly risk-free rates (RFRs), and markets based on these rates, and on further reforms to interbank offered rates (IBORs). The FSB has recently intensified its monitoring and coordination efforts given the importance of effective implementation of the reforms.

Interest rate benchmarks play a key role in global financial markets. The FSB started its work on reforms to IBORs in response both to cases of attempted manipulation and to the decline in liquidity in key interbank unsecured funding markets. In 2014, the FSB set out recommendations to reform major interest rate benchmarks, such as key IBORs, and has been monitoring progress on implementation since then.

The progress report considers three key areas:

  • IBORs: Although LIBOR has been strengthened, authorities have warned that publication of LIBOR may cease once official sector support for the benchmark is withdrawn at end-2021. Work has continued among the other major IBORs (EURIBOR and TIBOR) to strengthen existing methodologies to make them more grounded in actual transactions, as well as to strengthen regulatory frameworks and supervision. In other jurisdictions, actions are also underway to implement further regulatory reforms.

  • Alternative reference rates: In the markets which face the disappearance of IBORs, notably markets currently reliant on LIBOR, there needs to be an orderly transition to new reference rates that are sufficiently robust for such extensive use. Since the 2017 progress report, a great deal of progress has been made to identify RFRs and other alternative reference rates in currency areas currently reliant on LIBOR benchmarks, as well as to plan for and in some markets begin to execute transition to those RFRs.

  • Enhancing contractual robustness: Significant work continues on the part of FSB member authorities, national working groups, the International Swaps and Derivatives Association and other trade associations on the important task of strengthening contractual robustness to the risk of discontinuation of major interest-rate benchmarks. This issue goes beyond derivatives markets and applies to many types of cash products including syndicated loans, bonds and mortgages.

The FSB will publish a further progress report in late 2019.

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’s Official Sector Steering Group coordinates and monitors implementation of the FSB’s 2014 recommendations on reforming major interest rate benchmarks and identification and, where appropriate, transition to RFRs, including improving contractual robustness to the risk of discontinuation of widely-used interest rate benchmarks, and engages with national working groups and global trade associations on the issue.

In July 2018 the FSB issued a statement welcoming the progress that has been made by public authorities and private sector working groups on the identification and development of overnight RFRs that are sufficiently robust for such extensive use.

The FSB is chaired by Mark Carney, Governor of the Bank of England. Its Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements.

Cyber Lexicon

12 November 2018 | PDF full text (363 KB)

This lexicon comprises a set of approximately 50 core terms related to cyber security and cyber resilience in the financial sector. It is intended to support the work of the FSB, standard-setting bodies, authorities and private sector participants, e.g. financial institutions and international standards organisations, to address financial sector cyber resilience. The lexicon includes the following terms:

  • Access Control
  • Accountability
  • Advanced Persistent Threat (APT)
  • Asset
  • Authenticity
  • Availability
  • Campaign
  • Compromise
  • Confidentiality
  • Course of Action (CoA)
  • Cyber
  • Cyber Advisory
  • Cyber Alert
  • Cyber Event
  • Cyber Incident
  • Cyber Incident Response Plan
  • Cyber Resilience
  • Cyber Risk
  • Cyber Security
  • Cyber Threat
  • Data Breach
  • Defence-in-Depth
  • Denial of Service (DoS)
  • Detect (function)
  • Distributed Denial of Service (DDoS)
  • Exploit
  • Identify (function)
  • Identity and Access Management (IAM)
  • Incident Response Team (IRT)
  • Indicators of Compromise (IoCs)
  • Information Sharing
  • Information System
  • Integrity
  • Malware
  • Multi-Factor Authentication
  • Non-repudiation
  • Patch Management
  • Penetration Testing
  • Protect (function)
  • Recover (function)
  • Reliability
  • Respond (function)
  • Situational Awareness
  • Social Engineering
  • Tactics, Techniques and Procedures (TTPs)
  • Threat Actor
  • Threat Assessment
  • Threat Intelligence
  • Threat-Led Penetration Testing (TLPT)
  • Threat Vector
  • Traffic Light Protocol (TLP)
  • Verification
  • Vulnerability
  • Vulnerability Assessment

Cyber Lexicon: Overview of Responses to the Public Consultation

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On 2 July 2018, the FSB published a consultative document that set forth a draft Cyber Lexicon for public comment.

 The FSB received 29 responses to the public consultation from individual financial institutions; industry associations and other groups representing participants and service providers in the financial and other sectors, including banks, insurers, asset managers, exchanges, retirement plan providers and information technology and telecommunications firms; and consultants and individuals. Respondents generally welcomed the consultative document and supported the FSB’s work to develop a Cyber Lexicon for the financial sector and the objectives of the work.

This note summarises the issues raised in the public consultation and sets out the main changes that have been made to the lexicon to address them.

FSB publishes Cyber Lexicon

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Ref no: 38/2018

The Financial Stability Board (FSB) today published a Cyber Lexicon, following public consultation earlier this year. The lexicon comprises a set of approximately 50 core terms related to cyber security and cyber resilience in the financial sector.

The Cyber Lexicon is intended to support the work of the FSB, standard-setting bodies, authorities and private sector participants, e.g. financial institutions and international standards organisations, to address financial sector cyber resilience. The lexicon could be useful to support work in the following areas:

  • Cross-sector common understanding of relevant cyber security and cyber resilience terminology;

  • Work to assess and monitor financial stability risks of cyber risk scenarios;

  • Information sharing as appropriate; and

  • Work by the FSB and/or standard-setting bodies to provide guidance related to cyber security and cyber resilience, including identifying effective practices.

For example, the Cyber Lexicon will be used to support work on a recently announced FSB project to develop effective practices relating to a financial institution’s response to, and recovery from, a cyber incident. A progress report on this project will be published by mid-2019.

The FSB has developed the lexicon in response to a request from G20 Finance Ministers and Central Bank Governors at their October 2017 meeting. The FSB delivered a stocktake report to that meeting on existing publicly available regulations and supervisory practices with respect to cyber security in the financial sector.

The lexicon will be delivered to the G20 Leaders’ Summit in Buenos Aires later this month.

The FSB today also published an Overview of Responses to the Public Consultation on the Cyber Lexicon, which summarises the issues raised in the public consultation launched last July and sets out the main changes that have been made to the lexicon to address them. The individual responses to the public consultation are available on the FSB website.

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 Mark Carney, Governor of the Bank of England. Its Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements.

Application Paper on the Use of Digital Technology in Inclusive Insurance

View the Standard

This Application Paper seeks to provide guidance to supervisors, regulators and policymakers when considering, designing and implementing regulations and supervisory practices with respect to the use of digital technology in inclusive insurance. Whilst the primary focus of this paper is on building inclusive insurance markets, some considerations and suggested approaches could also be of interest to supervisors outside the inclusive insurance field. As well as considering the use of digital technology in inclusive insurance, this Application Paper examines aspects of FinTech and InsurTech relating to inclusive insurance. This Application Paper provides guidance on the following issues:

  • description of the typical inclusive insurance market and the typical inclusive insurance customer. This explanation is provided to offer context of the environment within which the supervisor is operating;

  • description of the use and implications of digital technology within inclusive insurance markets, thereby portraying the context within which the ICPs should be proportionately applied; and

  • concrete application guidance on the relevant ICPs, regarding the use of digital technology in inclusive insurance. Where relevant, examples of observed practices have been included.

Application Paper on Supervision of Insurer Cybersecurity

8 November 2018

View the Standard

This paper is a follow-up to the Issues Paper on Cyber Risk to the Insurance Sector, published in August 2016, which recommended that the IAIS develop and publish one or more Application Papers further exploring cyber risk, cybersecurity, and cyber resilience and proposed supervisory practices for the insurance sector.

The Application Paper is principles-based and builds on frameworks and guidance such as the G7 Fundamental Elements of Cybersecurity for the Financial Sector, the related G-7 Fundamental Elements for Effective Assessment of Cybersecurity in the Financial Sector and the CPMI-IOSCO Guidance on Cyber Resilience for Financial Market Infrastructures. The paper is intended to provide further guidance primarily to supervisors seeking to develop or enhance their approach to supervising the cyber risk, cyber security, and cyber resilience of insurers.

Application Paper on the Composition and the Role of the Board

View the Standard

This paper helps with the practical interpretation and application of selected standards and guidance of ICP 5 and ICP 7. The paper aims to provide additional guidance to supervisors on the IAIS’ standards concerning supervision of the Board activities, focusing on supervision of the aspects related to the composition and the role of the Board.

For a Board to be effective, two aspects may be deemed essential: formal aspects (such as suitability, composition, allocation and delegation of responsibilities) and behavioural aspects (such as dominance and too much influence, skills to challenge and to cooperate, capacity for change and openness to diversity). The paper elaborates on these two aspects and good practices for supervision are suggested.

FSB RCG for the MENA discusses SME financing, the use of SupTech and RegTech, and implementation of the Net Stable Funding Ratio

5 November 2018

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Ref no: 37/2018

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 for the G20 Leaders’ Summit later this month in Buenos Aires, including evaluations of the effects of the reforms on infrastructure finance and on incentives to centrally clear over-the-counter derivatives, and a progress report on the FSB action plan to assess and address the decline in correspondent banking relationships. The FSB’s work in 2019 and beyond will focus on (i) finalising and operationalising post-crisis reforms; (ii) monitoring the implementation and evaluating the effects of post-crisis reforms; and (iii) addressing new and emerging vulnerabilities in the financial system.

Turning to vulnerabilities and regional financial stability issues, meeting participants noted that, while global growth remains strong, the recovery is less balanced and financial conditions could tighten, particularly in emerging markets. For the MENA region specifically, members expect economic growth in oil exporting countries to rebound, while importing countries may remain challenged. The region’s banking sector remains generally sound with improved liquidity positions, but non-performing loan levels are high in some countries. Credit growth is modest and could be further impacted by rising interest rates.

Members next considered financing to small and medium-sized enterprises (SMEs) and their role in the region’s economic development. Although SMEs traditionally present more credit risk than large corporates, the level of risk in SMEs has declined in recent years, while credit and business conditions have improved. These positive developments, however, have not always translated into greater access to financing. Members discussed both financial and non-financial impediments to SME lending in the region. The FSB is conducting an evaluation of the effects of the G20 financial regulatory reforms on SME financing, and will publish a consultative paper by mid-2019 and a final report by end-2019.

The group discussed how technology can be leveraged to achieve supervisory and regulatory objectives (SupTech). They considered the potential uses of SupTech and how to facilitate innovation while at the same time maintaining effective oversight. They also exchanged views on how it could change supervision in the future and some of the challenges that technology might raise for financial sector supervisors, such as the skill sets that they will need, oversight of decentralised systems and distributed ledgers, and data protection. Members also discussed the use of technology such as big data and machine learning to help financial institutions comply with regulatory requirements (RegTech).

Finally, members discussed implementation of the Basel Committee’s net stable funding ratio (NSFR) and its effects on banks in the region. They reviewed the objectives and key elements of the NSFR, as well as implementation challenges such as those faced by banks when attempting to adjust their information systems to meet and report on the new requirements. Several jurisdictions in the region have either issued final rules for the implementation of the NSFR or are in the process of doing so.

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 Mark Carney, Governor of the Bank of England. Its 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. [←]