Evaluation of the effects of securitisation reforms: Overview of the responses to the consultation

22 January 2025 | PDF full text (122 KB)

Summary of document history

Summary of document history

On 2 July 2024, the FSB published a consultation report on the evaluation of the effects of the G20 financial regulatory reforms on securitisation. The objective of the consultation was to gather stakeholder feedback on the interim findings of the evaluation.

The FSB received 16 responses to the consultation, which ended on 2 September 2024.
During the consultation period, the FSB hosted a virtual public workshop on 22 August and organised a roundtable with academics to receive additional external views on the conceptual and empirical arguments for risk retention in collateralised loan obligations (CLOs).

This note summarises the feedback received on the consultation report – both from the public responses and from the workshop – and sets out the main changes made to the final report in order to address them. The note also provides a short overview of additional analysis carried out by the FSB since the consultation report to enhance the robustness of the results.

Assessment of Climate-related Vulnerabilities: Analytical framework and toolkit

16 January 2025 | PDF full text (2 MB)

Climate-related vulnerabilities in the financial system, when triggered by climate shocks, could threaten financial stability through various transmission channels and amplification mechanisms

Climate-related shocks could materialise through abrupt changes in policies, technological innovation and/or consumer preferences (transition risks), or through the materialisation of physical hazards, such as floods, droughts or windstorms (physical risks). These shocks raise concerns over financial institutions’ ability to manage their risks and to continue to provide financial services in certain segments and geographical areas. Climate shocks can interact with existing vulnerabilities in the real economy or in the financial system and threaten financial stability through various transmission channels and amplification mechanisms.

This report introduces an analytical framework that the FSB will use to trace how physical and transition climate risks can be transmitted and amplified by the global financial system. This framework builds on the existing FSB Financial Stability Surveillance Framework and focuses on assessing climate-related vulnerabilities holistically, particularly from a cross-border and cross-sectoral point of view.

Framework for the assessment of climate-related vulnerabilities
Framework for the assessment of climate-related vulnerabilities

Complementing the framework, the report identifies various metrics used by FSB members that could potentially be used to monitor climate-related vulnerabilities from a forward-looking perspective. The framework and toolkit are live documents, to be refined as understanding evolves on how climate-related vulnerabilities affect financial stability and as methodological and data issues are resolved.

FSB develops analytical framework and toolkit to assess climate-related vulnerabilities

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Ref: 2/2025

The Financial Stability Board (FSB) today published a report on the assessment of climate-related vulnerabilities. Building on the FSB Financial Stability Surveillance Framework and work carried out by members, the report provides an analytical framework and toolkit to assess climate-related vulnerabilities, particularly from a cross-border and cross-sectoral perspective.

Climate shocks trigger the typical vulnerabilities in financial stability assessments – such as credit, market and liquidity risks – but they are more complicated to analyse given their nature and uncertainties around timing and magnitude. The analytical framework traces how physical and transition climate risks can be transmitted and amplified within the global financial system.

A toolkit accompanying the framework comprises three categories of metrics to monitor climate-related vulnerabilities from a forward-looking perspective. These are: (i) proxies to provide early signals on potential drivers of transition and physical risks; (ii) exposure metrics to gauge the extent of direct and indirect exposures in the real economy and the financial system; and (iii) risk metrics to quantify the impacts for financial institutions and the system as a whole. While these metrics are already used by some FSB members domestically, various methodological and data challenges need to be overcome for them to be used for global monitoring.

“The framework provides a forward-looking approach to be able to capture the unique aspects of climate risks while staying rooted in traditional financial stability analysis”, said Sarah Breeden, Deputy Governor for Financial Stability at the Bank of England and Chair of the FSB group that prepared the report. Nellie Liang, Under Secretary for Domestic Finance at the US Treasury Department and Chair of the Standing Committee on Assessment of Vulnerabilities (SCAV) that oversaw the preparation of the report added: “The framework is a welcome addition to the FSB’s financial stability surveillance. The case study in the report examining the potential consequences of the crystallisation of climate physical risks via real estate markets and changes in insurance coverage illustrates how the framework can be applied in practice.”

The framework and toolkit are live documents, subject to refinement as understanding evolves on how climate-related vulnerabilities could affect financial stability. The FSB will continue to develop the framework by operationalising the toolkit and conducting in-depth analyses of specific climate vulnerabilities that may have global financial stability implications.

Notes to editors

The FSB’s work to assess climate-related vulnerabilities forms part of the FSB Roadmap to Address Climate-related Financial Risks. The Roadmap, which was endorsed by G20 Leaders in July 2021, outlines key actions to be taken by standard-setting bodies and international organisations over a multi-year period in four policy areas: firm-level disclosures, data, vulnerabilities analysis, and regulatory and supervisory practices and tools.

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 Klaas Knot, President of De Nederlandsche Bank. The FSB Secretariat is located in Basel, Switzerland and hosted by the Bank for International Settlements.

The Relevance of Transition Plans for Financial Stability

14 January 2025 | PDF full text (893 KB)

Transition plans hold potential for enhancing financial stability assessments by providing forward-looking information that can be useful to measure and monitor climate-related risks.

This report considers the role that financial and non-financial firms’ transition plans can play for financial stability assessments, in particular as a source of information for monitoring climate-related financial risks and vulnerabilities, and as a tool for helping to address some of those risks.

Climate transition planning and the resulting outputs – transition plans – have seen increased interest in recent years as a tool for firms to articulate their strategies and manage climate risks. Transition plans are increasingly being used by shareholders, investors and regulators to be informed of a company’s climate strategy and approaches to net zero transition.

Transition planning and transition plans can help address climate-related financial risks through three channels:

  1. They facilitate firms’ strategy setting, which contributes to better risk management.
  2. They help inform investment decisions.
  3. They can support authorities’ macro-monitoring of transition and physical risks both in the financial system and the real economy.

Climate transition plans hold potential for enhancing financial stability, as they provide forward-looking information that can be useful to measure and monitor climate-related financial risks at micro- and macro-levels. However, certain conditions need to be met to enable wider use of transition plans for financial stability purposes. These include enhancing the coverage, transparency, credibility, comparability and availability of information in those plans.

Broader adoption of transition plans and continued efforts towards standardisation, including ongoing and planned work by international organisations and standard-setters, are key to making transition plans practically usable for financial stability and macroprudential purposes.

FSB examines the relevance of climate transition plans for financial stability

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Ref: 1/2025

  • Climate transition plans provide forward-looking information that can be useful to measure and monitor climate-related risks to financial stability.
  • However, limited data availability and differences in scope, coverage and quality of key metrics limit the usefulness of transition plans for financial stability assessments at present.
  • Continued efforts towards standardisation and broader adoption of transition plans are key to enhancing effective use of these plans by financial authorities.

The Financial Stability Board (FSB) published today a report on The Relevance of Transition Plans for Financial Stability, which looks at the role that firms’ climate transition planning and the resulting outputs – transition plans – can play for financial stability. Transition plans provide forward-looking information on how non-financial companies and financial institutions may adjust their activities in response to climate risks, which can be useful for authorities to measure and monitor climate-related financial risks.

Transition planning and plans can help address climate-related risks to financial stability through three channels. First, they facilitate firms’ strategy setting, which informs better climate-related risk management. Second, they help inform investment decisions by addressing information gaps and reducing market failures. Third, they can support authorities’ macro-monitoring of transition and physical risks both in the financial system and the real economy.

The use of transition plans for financial stability and macroprudential purposes remains in the early stages. Transition plans are not inherently designed for the purpose of financial stability assessments; their primary purpose is business strategy and target setting. Moreover, they are only available for a restricted number of firms and differ widely in terms of scope, coverage, methodologies and quality of key metrics.

Satoshi Ikeda, Deputy Commissioner for International Affairs and Chief Sustainable Finance Officer at Japan’s Financial Services Agency, who chaired the FSB group that prepared the report said: “Because of their forward-looking perspective, transition plans could help improve the monitoring of climate-related financial risks by financial authorities, but more work is needed to enhance their coverage, transparency, reliability and comparability.”

Broader adoption of transition plans and continued efforts towards standardisation, including by international organisations and standard-setters, are key to making transition plans usable by financial authorities.

Notes to editors

Addressing the financial risks from climate change is a key priority of the FSB. In July 2021, the FSB published a Roadmap for Addressing Financial Risks from Climate Change, outlining the key actions to be taken by standard-setting bodies and other international organisations over a multi-year period in four key policy areas: firm-level disclosures, data, vulnerabilities analysis, and regulatory and supervisory practices and tools. This report aims to contribute to Roadmap discussions on how transition plans can be used to address climate financial risks.

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 Klaas Knot, President of De Nederlandsche Bank. The FSB Secretariat is located in Basel, Switzerland and hosted by the Bank for International Settlements.

Public responses to consultation on Format for Incident Reporting Exchange (FIRE)

3 January 2025

Summary of document history

Summary of document history

On 17 October 2024, the FSB published Format for Incident Reporting Exchange (FIRE): Consultation report. Interested parties were invited to provide written comments by 19 December 2024. The public comments received are available below.

Responses received

The FSB thanks those who took the time and effort to express their views. The FSB expects to publish the final report in Q2 2025.

Annual Progress Report on Meeting the Targets for Cross-border Payments: 2024 Methodology document

19 December 2024

Leverage in Non-Bank Financial Intermediation: Consultation report

18 December 2024 | PDF full text (499 KB)

Summary of document history

Summary of document history

The proposed policy recommendations aim to enhance the ability of authorities and market participants to monitor vulnerabilities from NBFI leverage, contain NBFI leverage where it may create risks to financial stability, and mitigate the impact of these risks.

This report focuses on policy measures to address leverage in non-bank financial intermediation (NBFI) where it can create financial stability risks.

Leverage is a financial technique used to increase exposures, boost returns or take positions that can offset potential losses from other exposures (hedging).

In 2023, the FSB published a report on The Financial Stability Implications of Leverage in Non-Bank Financial Intermediation, which discussed the vulnerabilities associated with NBFI leverage. That report found that NBFI leverage played a significant role in recent episodes of market stress, such as the March 2020 market turmoil, the default of Archegos in March 2021, the commodities market turmoil in 2022, and the Liability-Driven Investment (LDI) crisis that amplified stress in the UK Gilt market in September 2022.

Our proposed policy recommendations seek to address financial stability risks arising from leverage in NBFI, through improved risk identification and monitoring, a combination of policy measures, and enhanced cross-border collaboration.

The FSB is inviting comments on its consultation report and the questions set out below. Responses will be published on the FSB’s website unless respondents expressly request otherwise on the online form.

FSB consults on recommendations to address financial stability risks arising from leverage in non-bank financial intermediation

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Ref: 40/2024

  • Proposed policy recommendations aim to enhance the ability of authorities and market participants to identify, monitor and contain financial stability risks associated with leverage in non-bank financial intermediation (NBFI).
  • Proposed recommendations call for authorities to address financial stability risks from NBFI leverage in core financial markets; ensure sufficient counterparty credit risk management by leverage providers; and determine whether and how to address any inconsistencies in regulatory treatment.
  • The FSB and standard-setting bodies (SSBs) will undertake further work to support and assist authorities in applying the recommendations, including developing guidance where appropriate.

The Financial Stability Board (FSB) today published a consultation report on leverage in non-bank financial intermediation (NBFI). The proposed policy recommendations are addressed to FSB member authorities and SSBs. They aim to enhance the ability of authorities and market participants to monitor vulnerabilities from NBFI leverage, contain NBFI leverage where it may create risks to financial stability, and mitigate the impact of these risks. The recommendations build on the 2023 FSB report on The Financial Stability Implications of Leverage in Non-Bank Financial Intermediation, which found that NBFI leverage played a significant role in recent episodes of market stress.

The nine policy recommendations cover:

  • risk identification and monitoring, supported by a suite of risk metrics, and work to assess and address data challenges;
  • measures to address financial stability risks related to NBFI leverage in core financial markets, including measures that affect specific activities, types of entities, and concentration-related risks;
  • counterparty credit risk management and private disclosure;
  • addressing inconsistencies by adopting the principle of “same risk, same regulatory treatment”; and
  • enhancing cross-border cooperation and collaboration.

Entities in scope are non-bank financial firms that use leverage, either financial or synthetic, including hedge funds, other leveraged investment funds, pension funds, and insurance companies. Where relevant, banks and broker-dealers are also in scope in their role as leverage providers.

The FSB notes that market structures, legal frameworks, and financial stability risks related to leverage vary across jurisdictions. The report outlines general principles for the selection, design, and calibration of policy measures, noting that, in many cases, combinations of the policy measures outlined may be most effective in addressing financial stability risks arising from NBFI leverage.

The FSB is inviting comments on this consultation report and the questions set out within it. Responses should be submitted via this secure online form by 28 February 2025. All responses will be published on the FSB website unless respondents request otherwise. The final report will be published in mid-2025. 

Notes to editors

The proposed policy recommendations complement the FSB’s recommendations to enhance the liquidity preparedness of non-bank market participants for margin and collateral calls during times of market-wide stress, as well as the work of the SSBs, such as the Basel Committee on Banking Supervision (BCBS) work on counterparty credit risk management and the joint work by the BCBS, the Bank for International Settlements’ Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) on margining practices.

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 Klaas Knot, President of De Nederlandsche Bank. The FSB Secretariat is located in Basel, Switzerland and hosted by the Bank for International Settlements.

The FSB’s proposed recommendations to address leverage in NBFI

17 December 2024

Opening remarks by John Schindler, Secertary General of the Financial Stability Board, at the media briefing about the FSB's consultation document "Leverage in Non-Bank Financial Intermediation", hosted on 17 December 2024.

Hello everyone, thank you for joining today’s call.

The FSB has been looking at risks related to non-bank financial intermediation for a number of years. Yesterday, we published our annual global monitoring report, which showed that the NBFI sector accounts for almost 50% of total global financial assets and, has grown by ~130% between 2009 and 2023.

This growth comes with an increase in complexity and interconnectedness in the financial system, which, if not properly managed, can pose substantial risks to financial stability. This has been demonstrated by many recent episodes of market stress: the March 2020 market turmoil, the 2021 Archegos failure, and the September 2022 dislocation in the UK gilt market. Last year, we published a report highlighting the vulnerabilities associated with NBFI leverage, including propagation and amplification mechanisms, and describing the data gaps that lead to hidden leverage. We have spent the past year digging deeper into these issues and discussing with our members what policy measures could be taken to address them.

The results of this work form the basis of today’s consultation report.

The report puts forward nine policy recommendations addressed to FSB member authorities and to standard-setting bodies.

The recommendations should be seen as a comprehensive package that reflect the complexity of financial stability risks related to NBFI leverage in different jurisdictions, and the heterogeneous nature of NBFI entities, activities and market structures. They equip authorities with the flexibility needed to address specific risks within jurisdictions, while allowing for a consistency of outcomes across jurisdictions.

The recommendations aim to enhance authorities’ and market participants’ ability to identify, monitor and contain financial stability risk associated with NBFI leverage. Specifically:

  • The first group of recommendations speaks to the need for authorities to have a domestic framework in place to identify and monitor financial stability risks related to NBFI leverage. Such frameworks need to be robust and allow authorities to identify and monitor risks in a timely and effective manner, including through data, risk metrics, and disclosures to improve transparency and market discipline.
  • The second group of recommendations relates to the policy response. We propose a wide range of policy measures, including activity-based, entity-based, and concentration-related measures, to mitigate the specific financial stability risks posed by NBFI leverage in core financial markets. Authorities should select, design and calibrate the measures so that they can be effective and proportionate to the identified risks, taking into account the potential costs and unintended consequences.
  • The third group relates to the need to enhance counterparty credit risk management. We call for the timely and thorough implementation of the Basel Committee on Banking Supervision’s revised guidelines on counterparty credit risk. Additionally, we propose enhancing private disclosure practices between leveraged non-bank financial entities and their leverage providers.
  • The final two recommendations focus on addressing regulatory incongruence, and on cross-border cooperation and coordination. We advocate for the principle of “same risk, same regulatory treatment” to prevent regulatory arbitrage and ensure a consistent approach to managing financial stability risks across jurisdictions.

The proposed recommendations recognise that a combination of policy measures, chosen based on the nature of identified financial stability risks in each jurisdiction, will likely be more effective in addressing these risks than any standalone measure. It is important that authorities select, design and calibrate policy measures with a view to achieving consistent outcomes, on a global level, when it comes to addressing financial stability risks from NBFI leverage.

The FSB and standard-setting bodies will undertake further work to support and assist authorities in applying the recommendations, including developing guidance regarding the operationalisation of certain recommendations, where appropriate. We will be discussing next steps with the standard setters over the coming months.

We are confident that these recommendations, once implemented, will enhance the resilience of the NBFI sector. We look forward to receiving feedback from stakeholders during our consultation period.