Guidance on proliferation financing risk assessment and mitigation

30 June 2021

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In October 2020, the FATF revised its Standards (Recommendation 1 and its Interpretive Note) to require countries, financial institutions, designated non-financial businesses and professions (DNFBPs) and virtual asset service providers (VASPs) to identify, assess, understand and mitigate their proliferation financing risks. The FATF Guidance on Proliferation Financing Risk Assessment and Mitigation, published in June 2021, aims to help countries, financial institutions, DNFBPs and VASPs effectively implement these new FATF requirements.

The Guidance benefited from engagement with various stakeholders and reflects the input from a public consultation in March 2021. It explains how both public and private sectors should conduct risk assessments in the context of proliferation financing, and how they can mitigate the risks they identify. It provides an updated list of indicators of the potential breach, non-implementation or evasion of proliferation financing targeted financial sanctions.

The Guidance includes advice to supervisors and self-regulatory bodies responsible for ensuring that proliferation financing risks are being properly assessed and mitigated. The Guidance emphasises the need for supervisors, financial institutions, and other relevant entities to apply the new obligations in a manner that is proportionate to the risks identified, in order to avoid contributing to de-risking or financial exclusion.

Policy proposals to enhance money market fund resilience: Consultation Report

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Enhancing MMF resilience will help address systemic risks and minimise the need for future extraordinary central bank interventions to support the sector.

Summary of document history

Summary of document history

Enhancing MMF resilience will help address systemic risks and minimise the need for future extraordinary central bank interventions to support the sector.

The FSB’s holistic review of the March 2020 market turmoil highlighted structural vulnerabilities in MMFs and related stress in short-term funding markets. MMFs are susceptible to sudden and disruptive redemptions, and they may face challenges in selling assets, particularly under stressed conditions. These features can make individual MMFs, or even the entire MMF sector, susceptible to runs, and may also give rise to system-wide vulnerabilities.

The policy options in the report aim to address these vulnerabilities and are intended to inform jurisdiction-specific reforms and any necessary adjustments to the policy recommendations for MMFs issued by the International Organization of Securities Commissions (IOSCO). Enhancing MMF resilience will help address systemic risks and minimise the need for future extraordinary central bank interventions to support the sector.

The policy options are grouped according to the main mechanism through which they aim to enhance MMF resilience – namely, to: impose on redeeming investors the cost of their redemptions; absorb losses; reduce threshold effects; and reduce liquidity transformation. The report assesses the likely effects of each option on the behaviour of MMF investors, fund managers and sponsors, as well as their implications for the underlying markets,

The consultation report also sets out considerations on how different policy options could be selected and combined to address all the vulnerabilities arising from different types of MMFs. The optimal combination should take account of jurisdiction-specific circumstances and policy priorities, as well as cross-border considerations including to prevent regulatory arbitrage that could arise from adopting divergent approaches across jurisdictions.

Policies aimed at enhancing the resilience of MMFs could be accompanied by additional reforms in two areas: (i) policies to support robust risk management by fund managers and risk monitoring by authorities; and (ii) measures to improve the functioning of the underlying short-term funding markets.

Responses to the public consultation should be sent to [email protected] by 16 August with “MMF policy proposals” in the subject line. All responses will be published on the FSB website unless respondents request otherwise. The final report will be published in October 2021.

FSB seeks feedback on its policy proposals to enhance money market fund resilience

Press enquiries:
+41 61 280 8477
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Ref no: 16/2021

The Financial Stability Board (FSB) today published a consultation report with policy proposals to enhance money market fund (MMF) resilience. The proposals form part of the FSB’s work programme on non-bank financial intermediation (NBFI).

The FSB’s Holistic review of the March 2020 market turmoil highlighted structural vulnerabilities in MMFs and related stress in short-term funding markets. MMFs are susceptible to sudden and disruptive redemptions, and they may face challenges in selling assets, particularly under stressed conditions. These features can make individual MMFs, or even the entire MMF sector, susceptible to runs, and may also give rise to system-wide vulnerabilities.

The policy options in the report aim to address these vulnerabilities and are intended to inform jurisdiction-specific reforms and any necessary adjustments to the policy recommendations for MMFs issued by the International Organization of Securities Commissions (IOSCO). Enhancing MMF resilience will help address systemic risks and minimise the need for future extraordinary central bank interventions to support the sector.

The policy options are grouped according to the main mechanism through which they aim to enhance MMF resilience – namely, to: impose on redeeming investors the cost of their redemptions; absorb losses; reduce threshold effects; and reduce liquidity transformation. The report assesses the likely effects of each option on the behaviour of MMF investors, fund managers and sponsors, as well as their implications for the underlying markets,

The consultation report also sets out considerations on how different policy options could be selected and combined to address all the vulnerabilities arising from different types of MMFs. The optimal combination should take account of jurisdiction-specific circumstances and policy priorities, as well as cross-border considerations including to prevent regulatory arbitrage that could arise from adopting divergent approaches across jurisdictions.

Policies aimed at enhancing the resilience of MMFs could be accompanied by additional reforms in two areas: (i) policies to support robust risk management by fund managers and risk monitoring by authorities; and (ii) measures to improve the functioning of the underlying short-term funding markets.

Responses to the public consultation should be sent to [email protected] by 16 August with “MMF policy proposals” in the subject line. All responses will be published on the FSB website unless respondents request otherwise. The final report will be published in October 2021.

Notes to editors

The FSB published a Holistic review of the March 2020 market turmoil which lays out a comprehensive and ambitious work programme for strengthening the resilience of the NBFI sector while preserving its benefits. The policy proposals to enhance the resilience of MMFs are a key deliverable of the work programme for 2021.

The proposals were developed by the FSB Technical Expert Group (TEG) on MMFs, which comprises experts from FSB and IOSCO member institutions. The TEG is co-chaired by representatives of the Bank for International Settlements and the US Securities and Exchange Commission, supported by a joint FSB and IOSCO Secretariat. In preparing these proposals, the TEG analysed information from various sources and engaged with stakeholders.

The FSB coordinates at the international level the work of national financial authorities and international standard-setting bodies and develops and promotes the implementation of effective regulatory, supervisory, and other financial sector policies in the interest of financial stability. It brings together national authorities responsible for financial stability in 24 countries and jurisdictions, international financial institutions, sector-specific international groupings of regulators and supervisors, and committees of central bank experts. The FSB also conducts outreach with approximately 70 other jurisdictions through its six Regional Consultative Groups.

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

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Thematic Peer Review on Corporate Debt Workouts: Summary Terms of Reference

28 June 2021 | PDF full text (200 KB)

Effective corporate restructuring and insolvency frameworks are necessary to help minimise risks to financial stability that could be caused by widespread defaults.

The Financial Stability Board (FSB) is seeking feedback from stakeholders as part of its thematic peer review on corporate debt workouts. The objective of the review is to support COVID-19 response efforts by examining FSB member jurisdictions’ practices, experiences and lessons from out of court debt workouts (OCWs), and the implications for financial stability.

The peer review will take stock of existing and planned OCW frameworks in FSB jurisdictions. It will examine the experience of particular mechanisms that have been, or are being used, to address corporate stress, including the role of financial sector authorities. The review will also seek to identify good practices and lessons on how well OCW frameworks have worked in terms of preserving value for viable companies and how useful their debt restructurings are for resolving non-performing loans and dealing with a large number of distressed corporates.

The Summary Terms of Reference provide more details on the objectives, scope and process for this review. The FSB has distributed a questionnaire to member jurisdictions to collect information in this area. In addition, as part of this peer review, the FSB invites feedback from financial institutions, corporates, insolvency practitioners and other stakeholders on out of court corporate debt workouts. This could include comments on:

  • the types of OCW frameworks (e.g. informal workouts, enhanced workouts and hybrid workouts) most often used in your jurisdiction and why;

  • features of OCW frameworks that may be particularly helpful to minimise the economic and financial system damage caused by corporate defaults due to COVID-19;

  • the appropriate role of financial sector authorities in facilitating debt restructuring, including to incentivise the participation of various stakeholders in an OCW; and

  • experiences and challenges in the use of OCWs, including to manage the volume of non-performing loans in the financial system.

Feedback should be submitted by 9 August 2021 to [email protected] under the subject heading “FSB Thematic Peer Review on Corporate Debt Workouts”. Individual submissions will not be made public.

The peer review report is expected to be published in early 2022.

FSB launches thematic peer review on corporate debt workouts and invites feedback from stakeholders

Press enquiries:
+41 61 280 8477
[email protected]
Ref no: 15/2021

The Financial Stability Board (FSB) is seeking feedback from stakeholders as part of its thematic peer review on corporate debt workouts. The objective of the review is to support COVID-19 response efforts by examining FSB member jurisdictions’ practices, experiences and lessons from out of court debt workouts (OCWs), and the implications for financial stability.

The peer review will take stock of existing and planned OCW frameworks in FSB jurisdictions. It will examine the experience of particular mechanisms that have been or are being used to address corporate stress, including the role of financial sector authorities. The review will also seek to identify good practices and examples of how well OCW frameworks have worked in terms of preserving value for viable companies and how useful their debt restructurings are for resolving non-performing loans and dealing with a large number of distressed corporates.

The Summary Terms of Reference provide more details on the objectives, scope and process for this review. The FSB has circulated a questionnaire to its member jurisdictions to collect information in this area.

In addition, as part of this peer review, the FSB invites feedback from financial institutions, corporates, insolvency practitioners and other stakeholders on out of court corporate debt workouts. This could include comments on:

  • the types of OCW frameworks (e.g. informal workouts, enhanced workouts and hybrid workouts) most often used in your jurisdiction and why;

  • features of OCW frameworks that may be particularly helpful to minimise the economic and financial system damage caused by corporate defaults due to COVID-19;

  • the appropriate role of financial sector authorities in facilitating debt restructuring, including to incentivise the participation of various stakeholders in an OCW; and

  • experiences and challenges in the use of OCWs, including to manage the volume of non-performing loans in the financial system.

Feedback should be sent to [email protected] by 9 August 2021 under the subject heading “FSB Thematic Peer Review on Corporate Debt Workouts”. Individual submissions will not be made public. The peer review report will be published in early 2022.

Notes to editors

The FSB began a regular programme of peer reviews in 2010, consisting of thematic reviews and country reviews. Thematic reviews focus on the implementation and effectiveness across the FSB membership of international financial standards developed by standard-setting bodies and policies agreed within the FSB in a particular area important for global financial stability. Thematic reviews may also analyse other areas important for global financial stability where international standards or policies do not yet exist. Peer reviews are conducted according to the objectives and guidelines set out in the Handbook for FSB Peer Reviews. All published peer review reports are available on the FSB website.

The FSB coordinates at the international level the work of national financial authorities and international standard-setting bodies and develops and promotes the implementation of effective regulatory, supervisory, and other financial sector policies in the interest of financial stability. It brings together national authorities responsible for financial stability in 24 countries and jurisdictions, international financial institutions, sector-specific international groupings of regulators and supervisors, and committees of central bank experts. The FSB also conducts outreach with approximately 70 other jurisdictions through its six Regional Consultative Groups.

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

Application Paper on Supervision of Control Functions

23 June 2021

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Effective control functions with necessary independence, stature and resources help insurers identify and manage risks and are considered a crucial element of the corporate governance framework.

The Application Paper on Supervision of Control Functions describes practices aimed at helping supervisors address issues related to the supervision of control functions as described in the Insurance Core Principles (ICPs) and the Common Framework for the Supervision of Internationally Active Insurance Groups (ComFrame). In particular, the Application Paper supports observance of ICP 8 (Risk Management and Control Functions) and is relevant to ICP 5 (Suitability of Persons) and ICP 7 (Corporate Governance).

The Application Paper describes practices aimed at helping supervisors address issues related to the supervision of control functions, such as: role, independence, stature, combination and outsourcing of control functions

Application Paper on Resolution Powers and Planning

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The Application Paper on Resolution Powers and Planning aims to provide supporting material on supervisory practices related to resolution, which is defined in the IAIS Glossary as “actions taken by a resolution authority towards an insurer that is no longer viable, or is likely to be no longer viable, and has no reasonable prospect of returning to viability.” In particular, it provides background for the application of ICP 12 (Exit from the Market and Resolution), including the ComFrame standards and guidance, and is also relevant to ICP 25 (Supervisory Cooperation and Coordination), including the ComFrame standards and guidance (related to crisis management planning). These materials were adopted at the IAIS Annual General Meeting in November 2019.

This Paper aims to:

  • Provide support to supervisors and/or resolution authorities on the practical application of resolution powers, as well as on cooperation and coordination between authorities when planning for, and exercising, such powers;

  • Provide support with regard to resolution planning, which may be beneficial to supervisors, resolution authorities and/or insurers, depending on the circumstances within a jurisdiction; and

  • Provide examples to illustrate the application of standards and guidance relevant to resolution.

The Paper also aims to address issues that were identified during the development of supervisory material in ICP 12 and ComFrame, including feedback received from IAIS Members and stakeholders. Issues that were identified, include:

  • Further guidance and clarifications around expectations for resolution planning;

  • Explanations and examples of the application of resolution powers;

  • The practical application of proportionality in the case of resolution; and

  • The role of policyholder protection schemes (PPS) in resolution. This Paper discusses the role that a PPS, if established within a jurisdiction, may have in relation to certain resolution powers as well as in relation to the resolution authority. It does not, however, aim to provide a comprehensive overview on the role of PPSs in resolution. The IAIS plans to start the development of an Issues Paper on this topic in the second half of 2021.

Outsourcing and third-party risk – Overview of responses to the public consultation

14 June 2021 | PDF full text (186 KB)

Summary of document history

Summary of document history

On 9 November 2020, the FSB published a discussion paper for public consultation on Regulatory and Supervisory Issues Relating to Outsourcing and Third-Party Relationships. The FSB received 39 responses from a wide range of stakeholders including banks, insurers, asset managers, financial market infrastructures (FMIs), third-party service providers, industry associations, public authorities, and individuals. The FSB also held a virtual outreach meeting in late February 2021, attended by around 200 participants.

This note summarises the main issues raised and views expressed in the public consultation, including the virtual outreach meeting.

FSB Sub-Saharan Africa group discusses financial stability and regulatory and supervisory challenges arising from COVID-19

8 June 2021

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Ref no: 14/2021

The Financial Stability Board (FSB) Regional Consultative Group (RCG) for Sub-Saharan Africa held today a virtual meeting to discuss global and regional macroeconomic and financial market developments, including the financial stability implications of the COVID-19 pandemic on the region.

Members discussed some of the preliminary lessons learnt from the pandemic which were of particular relevance to Sub-Saharan African economies. Looking ahead, members exchanged views on potential threats to regional financial stability. They also shared their considerations in deciding whether and how to exit from temporary public support measures related to COVID-19, when conditions allow.

The group also discussed regulatory and supervisory challenges arising from the pandemic. They exchanged views on the aspects of the global regulatory framework that had been particularly important to their jurisdictions during the pandemic. They also shared information on specific adjustments they had made to their own regulatory and supervisory frameworks, in response to the pandemic, as well as any adjustments that might need to be made in response to identified longer-term and institutional resilience issues.

Members received an update on the FSB’s work programme and the planned deliverables for the G20 in 2021. The group discussed topics of importance for Sub-Saharan Africa member jurisdictions, including work underway in the FSB to: implement the G20 roadmap to enhance cross-border payments; support the transition away from LIBOR; strengthen cyber and operational resilience; and analyse and address climate-related financial risks.

Notes to editors

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

The FSB has six Regional Consultative Groups, established under the FSB Charter, to bring together financial authorities from FSB member and non-member countries to exchange views on vulnerabilities affecting financial systems and on initiatives to promote financial stability.1 Typically, each Regional Consultative Group meets twice each year.

The FSB coordinates at the international level the work of national financial authorities and international standard-setting bodies and develops and promotes the implementation of effective regulatory, supervisory, and other financial sector policies in the interest of financial stability. It brings together national authorities responsible for financial stability in 25 countries and jurisdictions, international financial institutions, sector-specific international groupings of regulators and supervisors, and committees of central bank experts. The FSB also conducts outreach with approximately 70 other jurisdictions through its six Regional Consultative Groups.

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

  1. The FSB Regional Consultative Groups cover the following regions: Americas, Asia, Commonwealth of Independent States, Europe, Middle East and North Africa, and sub-Saharan Africa. [←]

Global Transition Roadmap for LIBOR

2 June 2021 | PDF full text (157 KB)

Transition away from LIBOR requires significant commitment and sustained effort from both financial and non-financial institutions across many LIBOR and non-LIBOR jurisdictions.

The Financial Stability Board has identified that continued reliance of global financial markets on LIBOR poses clear risks to global financial stability. On 5 March 2021, ICE Benchmark Administration (IBA) and the UK Financial Conduct Authority (FCA) formally confirmed the dates that panel bank submissions for all LIBOR settings will cease, after which representative LIBOR rates will no longer be available. The majority of LIBOR panels will cease at the end of this year, with a number of key US dollar (USD) settings continuing until end-June 2023, to support rundown of legacy contracts only.

This updated Global Transition Roadmap (GTR) is intended to inform those with exposure to LIBOR benchmarks of some of the steps they should be taking now and over the remaining period to LIBOR cessation dates to successfully mitigate these risks. These are considered prudent steps to take to ensure an orderly transition by end-2021 and are intended to supplement existing timelines/milestones from industry working groups and regulators.

This does not constitute regulatory advice or affect any transition expectations set by individual regulators, which may require firms to move faster in some instances. It is important that all regulated financial institutions have an open and constructive LIBOR transition dialogue with their regulators, both home state and host state, throughout the transition period. As benchmark transitions vary across currency regions and legislation and other actions to promote transition are taking different paths in different jurisdictions, financial institutions, non-financial firms and others with exposure to LIBOR benchmarks should also monitor developments with regard to other IBORs relevant to their business.