FSB Americas group discusses global and regional vulnerabilities and COVID-19 support measures

4 May 2021

Press enquiries:
+41 61 280 8477
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Ref no: 8/2021

The Financial Stability Board (FSB) Regional Consultative Group (RCG) for the Americas held a virtual meeting today to discuss global and regional macroeconomic and financial market vulnerabilities and their potential impact on the region. Members discussed possible financial stability implications from the COVID-19 pandemic, including the impact of a more asynchronous recovery across regions and capital flows on emerging market and developing economies (EMDEs).

Members exchanged views on preliminary lessons learnt from COVID-19 and the effectiveness of policy support measures, in particular, potential spillover effects to EMDEs from policy measures taken by advanced economies. Members also discussed the implications of adjustments in, and the eventual withdrawal of, support measures once appropriate and their impact on cross-border banking, capital flows, and corporate sector debt.

The group received an update on the FSB’s work programme, including planned deliverables to the Italian G20 Presidency in 2021. Members discussed areas of importance for RCG Americas member jurisdictions, including work underway in the FSB to strengthen the resilience of non-bank financial intermediation; the FSB Roadmap for enhancing cross-border payments; transitioning away from LIBOR; strengthening cyber and operational resilience; and analysing and addressing climate-related financial risks.

Notes to editors

The FSB RCG for the Americas is co-chaired by Alejandro Díaz de León-Carrillo, Governor, Bank of Mexico and Cindy Scotland, Managing Director, Cayman Islands Monetary Authority. 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.

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 stability1. 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, 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. [←]

Call for papers: 2021 Annual Meeting of the Central Bank Research Association (CEBRA)

21 April 2021 | PDF full text (212 KB)

The FSB invites academic paper submissions for a plenary session on the topic of ‘Interconnectedness, Bond Market Liquidity and Financial Stability’ at the 2021 Annual Meeting of CEBRA. The conference is jointly organised with the Leibniz Institute for Financial Research “Sustainable Architecture for Finance in Europe” (SAFE) and will take place virtually at the MIT Golub Center for Finance and Policy from 7-9 July 2021.

With the overall growth of non-bank financial intermediation (NBFI) over the past decade, market liquidity has become more central to financial resilience. The March 2020 market turmoil has underlined the key role that bond markets play for pricing and managing liquidity. The turmoil has also shed light on the evolving interconnections and redistribution of liquidity within the financial system as a result of the increased involvement of non-bank entities in credit provision.

Authors are invited to submit papers that analyse and provide insights on the evolving linkages within the NBFI sector as well as between non-banks and banks (particularly on a cross-border basis), and on how these impact the stability of the financial system. Of particular interest are papers that examine the effects of G20 financial reforms on (government and corporate) bond market liquidity, and the implications for financial stability and the provision of financing to the economy in normal and stress periods.

Papers should be submitted via the SAFE website by 11 May 2021.

Peer Review of the United Kingdom

14 April 2021 | PDF full text (663 KB)

The UK authorities have implemented financial sector compensation reforms that are consistent with the FSB Principles and Implementation Standards

The peer review examines implementation of financial sector compensation reforms and focuses on the steps taken by the authorities to implement the FSB’s Principles and Implementation Standards (P&S).

The Review finds that the Prudential Regulation Authority and the Financial Conduct Authority (the Authorities) have implemented financial sector compensation reforms that are consistent with the P&S. Moreover, some of their approaches can serve as examples of good practice for other jurisdictions to consider. While the initial focus was on the banking sector, over time the Authorities have increasingly implemented the P&S in the insurance and asset management sectors. In combination with the Senior Managers and Certification Regime (SM&CR), the remuneration regime has helped firms become more disciplined in mapping responsibilities and has resulted in greater consistency and transparency on acceptable remuneration practices. With implementation well-advanced, the Authorities are increasingly focused on evaluating the regime’s effectiveness.

Notwithstanding this progress, the review concludes that steps can be taken to further strengthen the financial sector compensation framework in a few areas by:

  • reviewing the interaction between the UK’s remuneration regimes and the SM&CR;

  • streamlining data collection for level one banks and investments firms and collecting remuneration data from a broader range of firms;

  • considering other supervisory approaches for assessing the effectiveness of the remuneration regime; and

  • providing additional guidance on remuneration for the insurance sector to promote clarify and consistency of outcomes.

The peer review report includes recommendations to the UK Authorities on these issues.

FSB publishes peer review on the implementation of financial sector compensation reforms in the United Kingdom

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Ref no: 7/2021

The Financial Stability Board (FSB) today published its Peer Review of the United Kingdom (UK). The review focuses on the steps taken by the authorities to implement the FSB’s Principles and Implementation Standards (P&S) for Sound Compensation Practices and to assess the effectiveness of financial sector compensation reforms in the UK.

The review finds that the Prudential Regulation Authority and the Financial Conduct Authority (the Authorities) have implemented reforms that are consistent with the P&S. While the initial focus was on the banking sector, over time the Authorities have increasingly implemented the P&S in the insurance and asset management sectors. Some of their approaches can serve as examples of good practice for other jurisdictions to consider. These include adopting a risk-based and proportional regulatory and supervisory approach; setting expectations through public communication to Remuneration Committee Chairs of firms; a supervisory approach that focuses on close interaction between prudential and conduct rules and reinforces accountability with links to compensation outcomes; and evaluating the regime’s effectiveness.

Clear communication with the industry has helped firms understand and embed the requirements. In combination with the Senior Managers and Certification Regime (SM&CR), the remuneration regime has helped firms become more disciplined in mapping responsibilities and resulted in greater consistency and transparency on acceptable remuneration practices.

Notwithstanding this progress, the review concludes that steps can be taken to further strengthen the financial sector compensation framework in a few areas by:

  • reviewing the interaction between the UK’s remuneration framework and the SM&CR, including how their interplay rewards diligent and proactive risk management;

  • streamlining data collection for so-called ‘level one’ banks and investment firms and collecting remuneration data from a broader range of firms;

  • considering other supervisory approaches for assessing the effectiveness of the remuneration regime, such as additional thematic reviews and onsite visits; and

  • providing additional guidance on remuneration for the insurance sector to promote clarity and consistency of outcomes.

The peer review report includes recommendations to the UK Authorities on these issues.

Notes to editors

FSB member jurisdictions have committed to undergo periodic peer reviews to evaluate their adherence to international financial standards. To fulfil this responsibility, the FSB has established a regular programme of thematic and country reviews, based on the objectives and guidelines set out in the Handbook for FSB Peer Reviews. As part of this commitment, the United Kingdom volunteered to undergo a peer review in 2020. This review forms part of the second round of country peer reviews of FSB member jurisdictions, which examine the implementation of G20 financial regulatory reforms. All completed peer review reports are available on the FSB website.

The draft report was prepared by a team of experts from FSB member institutions and led by Unathi Kamlana, Head of the Policy, Statistics and Industry Support Department at the South African Reserve Bank. The review benefited from dialogue with the UK authorities and market participants as well as from discussion in the FSB Standing Committee on Standards Implementation.

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.

Global Securities Financing Data Collection and Aggregation: Frequently Asked Questions

12 April 2021 | PDF full text (501 KB)

Securities financing transactions (SFTs) such as securities lending and repurchase agreements (repos) play a crucial role in supporting price discovery and secondary market liquidity for a wide variety of securities. However, such transactions can also be used to take on leverage and can lead to maturity and liquidity mismatched exposures. They therefore can pose risks to financial stability.

The FSB published policy recommendations to address financial stability risks in SFTs in August 2013. In November 2015, the FSB developed standards and processes for collecting and aggregating global data on SFTs (SFT Data Standards). To facilitate national implementation of the SFT Data Standards, the FSB has developed reporting guidelines.

Drawing on practical experience, the FSB is providing these Frequently Asked Questions (FAQs) to promote a common approach and to further help national implementation of the SFT Data Standards. The FAQs will continue to be updated as market practices evolve.

Please contact the FSB Secretariat ([email protected]) for any inquiries.

FSB seeks stakeholders’ feedback on their experience with the common template for gathering information about continuity of access to financial market infrastructures (FMIs) for firms in resolution

6 April 2021

The FSB is conducting a survey to gather stakeholders’ feedback on its common template for collecting information on continuity of access to financial market infrastructures (FMIs) for firms in resolution. The common template for financial market infrastructures (FMIs), which takes the form of a questionnaire (the Questionnaire), was published in August 2020. The use of a common template should reduce the “many to one” nature of inquiries from FMI participants and authorities to FMIs for resolution planning and streamline the provision of this information by FMIs to firms and authorities.

This survey  is part of the FSB’s outreach strategy with external stakeholders regarding the topic of Continuity of Access to FMIs for firms in resolution. Several bank resolution authorities are, concurrently, also working to provide FMIs with further insight into their bank resolution toolkits and the impact of these tools on a bank’s ability to maintain continuity of access to FMI services in resolution.1

All FMIs (as providers of responses to the Questionnaire) as well as firms subject to a resolution planning requirement and bank resolution authorities (as users of FMIs’ responses to the Questionnaire) are encouraged to participate in this online survey. Stakeholders’ input will support the efforts of FSB member authorities to ensure the Questionnaire template remains relevant and accessible, and help to reduce the burden of information gathering for firms on this topic.

The survey closes on Monday 3 May at 08:59 AM CEST.

  1. For instance, the Single Resolution Board recently published an overview of this topic in the Banking Union. [←]

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

| PDF full text (118 KB)

The factors to consider on COVID-19 support measures, and a roadmap to address climate-related financial risks.

This letter from the FSB Chair, Randal K. Quarles, to G20 Finance Ministers and Central Bank Governors ahead of their virtual meeting on 7 April notes that, while progress is moving at different speeds across jurisdictions, the vaccine rollout heralds an inflection point in the COVID-19 pandemic. While it is sensible to keep measures that support financial system stability and financing of the real economy in place as long as needed, the factors to be considered in deciding whether to extend, amend and, eventually, end support measures are taking shape.

The FSB report on these factors notes that withdrawal of support measures before the macroeconomic outlook has stabilised could be associated with significant immediate risks to financial stability. But financial stability risks may gradually build if support measures remain in place for too long. On balance, most authorities currently believe that the costs of premature withdrawal of support could be more significant than maintaining support for too long. Overall, a flexible, state-contingent approach can help to minimise financial stability risks. FSB members have committed to coordinate on the unwinding of support measures and the FSB will continue to support that coordination.

The Chair’s letter applauds the significant progress made on too-big-to-fail (TBTF) reforms for banks. The evaluation of TBTF reforms for banks – the largest evaluation that the FSB has carried out so far – suggests that reforms have reduced systemic risks, enhanced the credibility of resolution and market discipline, and ultimately produced net benefits to society. Nevertheless, TBTF reforms can be developed further, notably on implementation of Total Loss Absorbing Capacity (TLAC) and transparency of resolution funding mechanisms.

Moreover, some risks have moved outside the banking system. The FSB’s Holistic Review of the March 2020 market turmoil examined the increasingly important role of – and vulnerabilities in – non-bank financial intermediation (NBFI). The FSB’s NBFI work programme seeks to address these vulnerabilities. A first deliverable will be to submit policy proposals to enhance money market fund resilience to the G20 in July.

Finally, the letter notes the importance of addressing issues related to climate change. Three climate-related workstreams are currently underway in the FSB, covering data, disclosures and regulatory and supervisory practices. In July, the FSB will provide the G20 with two reports, on ways to promote consistent, high-quality climate disclosures in line with the recommendations of the Task Force for Climate-related Financial Disclosures; and on the data necessary for the assessment of financial stability risks and related data gaps.

While the greater momentum in climate work by various bodies is welcome, it also increases the importance of strategic vision, good coordination, and clear communication to the G20 and the public. The FSB will present to the G20 a coordinated, forward-looking roadmap to address climate-related financial risk. This roadmap will be key to promoting rapid progress amongst jurisdictions. To enable better coordination, the FSB has invited the Network for Greening the Financial System (NGFS) to participate in FSB climate-related work, and the FSB will apply for observer status in the NGFS. The FSB will also coordinate closely with the G20 group on sustainable finance re-established by the Italian G20 Presidency as it develops its broader roadmap on sustainable finance, so that the FSB’s work dovetails with theirs.

COVID-19 support measures: Extending, amending and ending

| PDF full text (779 KB)

A speedy, sizeable and sweeping policy response has been key to limiting the economic fallout of the COVID-19 shock.

In April 2020, the G20 finance ministers and central bank governors committed to follow the five principles set out in the FSB’s report on COVID-19. They reiterated their commitment to share information on a timely basis to assess and address financial stability risks from COVID-19, and to coordinate on the unwinding of the temporary measures.  Against this background, the Presidency of the G20 asked the FSB to report to the G20 finance ministers and governors in April 2021 on policy considerations relating to the unwinding of support measures.

In view of the current situation, most of the COVID-19 policy support measures remain in place, and their withdrawal is typically not imminent. Nevertheless, policymakers need to form their views on whether, when and how to extend, amend or unwind their support measures. The report discusses the extent to which measures have been unwound so far and the matters to which policymakers should have regard when considering whether to extend, amend or end their economic and financial support measures. Its purpose is to assist G20 members and other policymakers by providing a benchmark and drawing attention to practices in FSB member jurisdictions.

The report notes that withdrawal of support measures before the macroeconomic outlook has stabilised could be associated with significant immediate risks to financial stability. At the same time, financial stability risks may gradually build if support measures remain in place for too long. On balance, most authorities believe that premature withdrawal of support could inflict more damage to the economy than maintaining support for too long.

Authorities have a number of options for managing these trade-offs and may follow a flexible, state-contingent approach, adjusting and withdrawing gradually, by:

  • Ensuring that measures are targeted to those most affected.
  • Requiring beneficiaries to opt in to receive support rather than automatically.
  • Making the terms on which support is provided progressively less generous.
  • Sequencing the withdrawal of support measures rather than withdrawing all at once.

Clear, consistent and timely communication about policy intentions can help reduce the costs associated with withdrawal of support, not least by reducing the risk of surprises and abrupt adjustments in financial markets.

The report also notes the importance of a resilient and well-functioning financial system as a precondition for smooth adjustment as public support is phased out. In addition, further work is needed to understand the risk of harmful cross-border and cross-sector spillovers, including possible feedback loops, and options to mitigate the risk.

FSB members have committed to sharing information and returning to full alignment with global standards in order to minimise the risk of harmful market fragmentation. The FSB will continue to support international coordination on the unwinding of COVID-19 support measures.

FSB Chair updates G20 on COVID-19 support measures, and a roadmap to address climate-related financial risks

Press enquiries:
+41 61 280 8477
[email protected]
Ref no: 6/2021

The Financial Stability Board (FSB) today published a letter from the FSB Chair, Randal K. Quarles, to G20 Finance Ministers and Central Bank Governors ahead of their virtual meeting on 7 April. The FSB also delivered to the G20 a report on factors to be considered in extending, amending and ending COVID-19 support measures.

The letter notes that, while progress is moving at different speeds across jurisdictions, the vaccine rollout heralds an inflection point in the COVID-19 pandemic. While it is sensible to keep measures that support financial system stability and financing of the real economy in place as long as needed,  the factors to be considered in deciding whether to extend, amend and, eventually, end support measures are taking shape.

The FSB report on these factors notes that withdrawal of support measures before the macroeconomic outlook has stabilised could be associated with significant immediate risks to financial stability. But financial stability risks may gradually build if support measures remain in place for too long. On balance, most authorities currently believe that the costs of premature withdrawal of support could be more significant than maintaining support for too long. Overall, a flexible, state-contingent approach can help to minimise financial stability risks. FSB members have committed to coordinate on the unwinding of support measures and the FSB will continue to support that coordination.

The Chair’s letter applauds the significant progress made on too-big-to-fail (TBTF) reforms for banks. The evaluation of TBTF reforms for banks – the largest evaluation that the FSB has carried out so far – suggests that reforms have reduced systemic risks, enhanced the credibility of resolution and market discipline, and ultimately produced net benefits to society. Nevertheless, TBTF reforms can be developed further, notably on implementation of Total Loss Absorbing Capacity (TLAC) and transparency of resolution funding mechanisms.

Moreover, some risks have moved outside the banking system. The FSB’s Holistic Review of the March 2020 market turmoil examined the increasingly important role of – and vulnerabilities in – non-bank financial intermediation (NBFI). The FSB’s NBFI work programme seeks to address these vulnerabilities. A first deliverable will be to submit policy proposals to enhance money market fund resilience to the G20 in July.

Finally, the letter notes the importance of addressing issues related to climate change. Three climate-related workstreams are currently underway in the FSB, covering data, disclosures and regulatory and supervisory practices. In July, the FSB will provide the G20 with two reports, on ways to promote consistent, high-quality climate disclosures in line with the recommendations of the Task Force for Climate-related Financial Disclosures; and on the data necessary for the assessment of financial stability risks and related data gaps.

While the greater momentum in climate work by various bodies is welcome, it also increases the importance of strategic vision, good coordination, and clear communication to the G20 and the public. The FSB will present to the G20 a coordinated, forward-looking roadmap to address climate-related financial risk. This roadmap will be key to promoting rapid progress amongst jurisdictions. To enable better coordination, the FSB has invited the Network for Greening the Financial System (NGFS) to participate in FSB climate-related work, and the FSB will apply for observer status in the NGFS. The FSB will also coordinate closely with the G20 group on sustainable finance re-established by the Italian G20 Presidency as it develops its broader roadmap on sustainable finance, so that the FSB’s work dovetails with theirs.

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, 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.