Virtual workshop on the lessons learnt from the COVID-19 pandemic from a financial stability perspective

13 August 2021

On 1 September the FSB hosted a virtual outreach workshop to discuss the FSB’s interim lessons learnt report. The report identifies preliminary lessons from the COVID-19 experience and aspects of the functioning of the G20 financial reforms that may warrant attention at the international level. Stakeholder feedback will help inform the FSB’s final report, which will be published ahead of the G20 Summit in October 2021.

FSB workshop on compensation practices 2021: Summary of discussion

9 August 2021 | PDF full text (153 KB)

On 18 and 19 May 2021, the Financial Stability Board (FSB) hosted an industry virtual workshop as a part of its regular assessment of the effectiveness of the implementation of the FSB’s Principles for Sound Compensation Practices and their Implementation Standards.

The workshop was an opportunity to exchange information on key compensation issues and challenges for the effective alignment of risk and compensation, with an additional focus on the impact of the pandemic on firms’ compensation practices. The workshop covered:

  1. Non-financial criteria and measures, behaviours and firm culture – Participants identified trends in the use of non-financial criteria, potential differences across sectors and how these criteria affect and are affected by firm culture.

  2. Effective alignment of risk and compensation – Participants identified effective practices for alignment between risk and compensation and how practices may vary across sectors.

  3. Legal and regulatory issues – The discussion focused on the most significant legal and regulatory impediments to the use of compensation tools, such as malus and clawback and possible steps to address these. The session also explored firms’ use of severance pay.

  4. COVID-19 and compensation – Participants discussed compensation-related actions firms and supervisors have taken in relation to COVID-19.

The discussions from the workshop are an input into the FSB’s ongoing work on identifying effective practices and enhancements to compensation frameworks.

Virtual workshop on policy proposals to enhance money market fund resilience

29 July 2021

Summary of document history

Summary of document history

On 12 July 2021 the FSB hosted a virtual workshop to discuss its consultation report on its policy proposals to enhance money market fund (MMF) resilience.

The objective of the workshop was for officials from FSB member authorities involved in the preparation of the consultation report to exchange views with industry representatives, academics and other stakeholders on the analysis of MMF vulnerabilities and on the policy options to address them.

More details on the workshop can be found in the agenda. The workshop, together with written consultation responses, will inform the final FSB report, which will be published ahead of the G20 Summit in October 2021.

Public responses to consultation on Targets for Addressing the Four Challenges of Cross-Border Payments

20 July 2021

Summary of document history

Summary of document history

On 31 May 2021, the FSB published Targets for Addressing the Four Challenges of Cross-Border Payments: Consultative document. Interested parties were invited to provide written comments by 6 July 2021. 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 targets in October 2021.

Lessons learnt from the COVID-19 pandemic from a financial stability perspective: Interim report

13 July 2021 | PDF full text (718 KB)

The COVID-19 pandemic presents a real-life test that may hold important lessons for financial policy, including the functioning of G20 reforms.

The COVID-19 pandemic is the first major test of the global financial system since the G20 reforms were put in place following the financial crisis of 2008. While significantly different in nature from the 2008 crisis, this real-life test may hold important lessons for financial policy, including the functioning of the G20 reforms.

The report identifies preliminary lessons for financial stability from the COVID-19 experience and aspects of the functioning of the G20 financial reforms that may warrant attention at the international level.

The report notes that, thus far, the global financial system has weathered the pandemic thanks to greater resilience, supported by the G20 reforms, and the swift, determined and bold international policy response. Authorities broadly used the flexibility within international standards to support financing to the real economy. Monitoring and coordination, guided by the FSB COVID-19 Principles, has discouraged actions that could distort the level playing field and lead to harmful market fragmentation.

The COVID-19 experience reinforces the importance of completing remaining elements of the G20 reform agenda. The financial stability benefits of the full, timely and consistent implementation of those reforms remain as relevant as when they were agreed. Those parts of the global financial system where implementation of the reforms is most advanced displayed resilience. The pandemic has highlighted the importance of effective operational risk management arrangements and the need to further enhance crisis management preparedness and promote resilience amidst rapid technological change.

The pandemic also highlighted differences in resilience within and across financial sectors. The March 2020 market turmoil has underscored the need to strengthen resilience in non-bank financial intermediation. The functioning of capital and liquidity buffers may warrant further consideration, while some concerns about excessive financial system procyclicality remain.

COVID-19 may yet test the resilience of the global financial system. Banks and non-bank lenders could face additional losses as support measures are unwound. Identifying systemic vulnerabilities early on remains a priority. One of the legacies of the pandemic may be a build-up of leverage and debt overhang in the non-financial sector. Addressing debt overhang, including by facilitating the market exit of unviable companies and by promoting the efficient reallocation of resources to viable firms, may be a key task for policymakers going forward.

The FSB will engage with external stakeholders on preliminary findings and issues raised in this report. The final report, which will incorporate this feedback and set out tentative lessons and next steps to address the identified issues, will be delivered to the G20 Summit in October.

FSB identifies preliminary lessons for financial stability from the COVID-19 experience

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Ref no: 19/2021

The Financial Stability Board (FSB) today published its Interim Report on the Lessons Learnt from the COVID-19 Pandemic from a Financial Stability Perspective. The report identifies preliminary lessons for financial stability and aspects of the functioning of the G20 financial reforms that may warrant attention at the international level.

The COVID-19 pandemic is the first major test of the global financial system since the G20 reforms were put in place following the financial crisis of 2008. Thus far, the financial system has weathered the pandemic thanks to greater resilience, supported by the G20 reforms, and the swift, determined and bold international policy response. Authorities broadly used the flexibility within international standards to support financing to the real economy. Monitoring and coordination, guided by the FSB COVID-19 Principles, has discouraged actions that could distort the level playing field and lead to harmful market fragmentation.

The COVID-19 experience reinforces the importance of completing remaining elements of the G20 reform agenda. Those parts of the global financial system where implementation of the reforms is most advanced displayed resilience. The functioning of capital and liquidity buffers may warrant further consideration, while some concerns about excessive financial system procyclicality remain.

The March 2020 market turmoil has underscored the need to strengthen resilience in non-bank financial intermediation. The FSB has developed a comprehensive work programme to enhance the resilience of the NBFI sector while preserving its benefits.

The pandemic has also highlighted the importance of effective operational risk management arrangements, the need to enhance further crisis management preparedness, and the importance of promoting financial resilience amidst rapid technological change more generally.

COVID-19 may yet test the resilience of the global financial system. Banks and non-bank lenders could face additional losses as support measures are unwound. Addressing debt overhang, including by facilitating the market exit of unviable companies and by promoting the efficient reallocation of resources to viable firms, may be a key task for policymakers going forward.

The FSB will engage with external stakeholders on preliminary findings and issues raised in this report. The final report, to be delivered to the G20 Summit in October, will set out tentative lessons and next steps to address the identified issues.

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, Governor and Vice Chair for Supervision, 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.

FSB Chair’s letter to G20 Finance Ministers and Central Bank Governors: July 2021

7 July 2021 | PDF full text (160 KB)

On the road to normality some risks to financial stability still remain elevated. The FSB also remains vigilant financial stability risks beyond COVID, including climate change and LIBOR transition.

The letter notes mounting evidence of global recovery, even if uneven across regions. However, some risks to financial stability remain elevated. The global financial system has weathered the COVID Event thus far, thanks to greater resilience brought about by the G20 financial regulatory reforms, and the swift, bold and determined international policy response. But there are areas where there is a need to understand better whether the reforms have functioned as intended, and others where the COVID Event has surfaced vulnerabilities that need to be addressed with urgency, notably in non-bank financial intermediation, including in money market funds.

The Chair’s letter stresses the need for coordinated action to address financial risks posed by climate change, noting the large, and growing, number of international initiatives underway. The FSB has submitted to the G20 for endorsement a comprehensive roadmap to address climate-related financial risks. The roadmap outlines the work underway and still to be done by standard-setting bodies and other international organizations over a multi-year period in four key policy areas: disclosures, data, vulnerabilities analysis, and regulatory and supervisory approaches.

The Chair’s letter also reiterates the importance of completing the transition way from LIBOR to robust alternative rates by end-2021 and strongly urges market participants to act now to complete the steps set out in the FSB’s Global Transition Roadmap.

FSB Roadmap for Addressing Climate-related Financial Risks

| PDF full text (1 MB)

There is a need to coordinate the large and growing number of international initiatives underway on addressing financial risks from climate change.

There is a growing focus on potential risks to financial stability from climate change. A large, and growing, number of international initiatives are underway on addressing financial risks from climate change. Ongoing work by official sector bodies, including the FSB, NGFS, BCBS, IAIS, IOSCO, OECD, IMF and World Bank, and a variety of private sector bodies on climate issues have been added to recently by the IFRS Foundation proposal to establish an International Sustainability Standards Board (ISSB), initially focused on climate-related reporting. More generally, climate topics are being given an important place in both the G20 and G7 agendas for 2021, and preparations are underway for COP26.

This roadmap for addressing climate-related financial risks, which has been prepared in consultation with standard-setting bodies (SSBs) and other relevant international bodies, supports international coordination in several ways.

  • It promotes relevant initiatives at standard-setting bodies, the NGFS and other international organisations.

  • By presenting relevant ongoing and planned international work in one place, it helps to identify gaps to be covered by further work, limit overlap and promote synergies.

  • It sketches out how the FSB can serve as a forum for discussing cross-sectoral and systemic issues and agreeing a way forward.

  • It provides input into broader international policy considerations by facilitating communication with the G20, G7 and COP26.

All this supports the consistency of actions to be taken over the coming years, enhances authorities’ ability to address financial stability risks and reduces the risk of harmful market fragmentation.

The roadmap focuses on work to assess and address financial risks of climate change through four main, interrelated areas: firm-level disclosures; data; vulnerabilities analysis and regulatory and supervisory tools.

The FSB roadmap sets out a comprehensive and coordinated plan for addressing climate-related financial risks, including steps and indicative timeframes needed to do so, and paves the way for implementation. It will be delivered to the G20 Finance Ministers and Central Bank Governors meeting in July 2021.