31 March 2021 | PDF full text (186 KB)
On 28 June 2020 the FSB published a consultative document on the evaluation of the effects of the too-big-to-fail reforms for systemically important banks. The FSB received 28 written responses from a variety of stakeholders. This document summarises the responses received and sets out the main changes made to the evaluation report as a result.
The BCBS recognises that the exact approach for operational risk management chosen by an individual bank will depend on a range of factors, including its size and sophistication and the nature and complexity of its activities. However, despite these differences, clear strategies and oversight by the board of directors and senior management, a strong operational risk culture and internal control culture (including, among other things, clear lines of responsibility and segregation of duties), effective internal reporting, and contingency planning are all crucial elements of an effective operational risk management framework for banks of any size and scope. The document outlines a set of principles that provide a framework for the effective management and supervision of operational risk, for use by banks and supervisory authorities when evaluating operational risk management policies and practices. It details eleven principles of sound operational risk management covering governance, risk management environment, and the role of disclosure.
The principles aim to strengthen banks’ ability to withstand operational risk-related events that could cause significant operational failures or wide-scale disruptions in financial markets, such as pandemics, cyber incidents, technology failures or natural disasters. The approach builds on revisions to the BCBS , and draws from previously issued principles on corporate governance for banks, as well as outsourcing-, business continuity- and relevant risk management-related guidance.
30 March 2021 | PDF full text (132 KB)
Speaking at the Petersen Institute for International Economics, FSB Chair Randal K. Quarles updates on the FSB’s work programme for 2021 and some of its priority areas.
24 March 2021
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Ref no: 4/2021
The Financial Stability Board (FSB) Regional Consultative Group (RCG) for the Middle East and North Africa (MENA) held its 19th (virtual) meeting today to discuss financial stability issues affecting the region, including those stemming from recent developments associated with the COVID‑19 pandemic.
Members also exchanged views on some of the challenges in assessing the effectiveness of policy measures to support those parts of the economy most vulnerable to the pandemic and in creating an exit strategy from temporary support. Members reiterated the importance of international cooperation to evaluate and coordinate the policy responses, including considerations for their future unwinding.
The group received an update on the FSB’s work programme, including planned deliverables to the G20 during the Italian G20 Presidency in 2021, also incorporating follow-up on initiatives begun during the Saudi Arabian G20 Presidency in 2020. Key FSB deliverables for 2021 include: a report on lessons learned from financial policy responses to COVID-19; work on strengthening the resilience of non-bank financial intermediation (NBFI); implementing the G20 roadmap to enhance cross-border payments; transitioning away from LIBOR; strengthening cyber and operational resilience; and analysing and addressing climate-related financial risks.
RCG MENA members explored ways to contribute to the FSB’s work, in particular to the G20’s roadmap on enhancing cross-border payments. The roadmap provides a set of actions, with milestones, to make cross-border payments faster, cheaper, more transparent, and more inclusive. Members discussed, as part of the work on the roadmap, the steps being taken to strengthen regulation, supervision and oversight of global stablecoins arrangements. Members looked forward to continuing their discussions on enhancing cross-border payments at their workshop on instant payments the following day, when they would also benefit from exchanging views and experiences from private sector participants.
The FSB RCG for the Middle East and North Africa is co-chaired by Fahad Almubarak, Governor of the Saudi Central Bank, and Rasheed Al-Maraj, Governor of the Central Bank of Bahrain. Membership includes financial authorities from Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Morocco, Oman, Qatar, Saudi Arabia, Tunisia, Turkey and the United Arab Emirates.
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.
18 March 2021 | PDF full text (113 KB)
Remarks by Dietrich Domanski at the launch of the International Regulatory Strategy Group’s (IRSG) latest report entitled, ‘Global Solutions to Global Problems: Promoting Regulatory Coherence in Financial Services for Pandemic Recovery’.
26 February 2021
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Ref no: 3/2021
The Financial Stability Board (FSB) today published its Peer Review of Indonesia. The review examines steps the authorities have taken to implement over-the-counter (OTC) derivatives market reforms in Indonesia, including by following up on relevant G20 commitments.
Indonesia’s OTC derivatives market is relatively small, both compared to its economy and from a global perspective, but has been steadily growing over the past five years. Foreign exchange (FX) derivatives are by far the largest OTC derivatives class, followed by interest rate and commodity derivatives. Domestic banks, including local subsidiaries of foreign banking groups and local branches of foreign banks, are the most active market participants.
The review finds that the Indonesian authorities have made some progress in implementing OTC derivatives reforms, while focusing on developing their domestic derivatives market. Reporting requirements have been in place for banks’ OTC FX and interest rate derivatives transactions and for other participants’ commodity derivatives transactions for many years, and there is effective sharing and use of the data collected among domestic authorities. Progress continues on central clearing requirements and margin requirements for non-centrally cleared derivatives (NCCDs), and the authorities are appropriately prioritising these areas over establishing platform trading. The report notes the authorities’ continued progress on these reforms despite pressures in the wake of the COVID-19 pandemic.
Notwithstanding this progress, the review concludes that further steps can be taken by:
improving the reporting, use and public transparency of OTC derivatives data, including a timeline for adopting unique global identifiers for entities, transactions and products;
addressing legal uncertainties relating to netting for derivatives transactions in bankruptcy in order to facilitate central clearing and margin requirements; and
implementing the remaining OTC derivatives reforms (central clearing of standardised OTC derivatives, margin requirements for NCCDs, and capital requirements for exposures to central counterparties) in an appropriately sequenced manner.
The peer review report includes recommendations to the Indonesian authorities in order to address these issues.
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, Indonesia 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 Daphne Doo, who at the time of the review was Senior Director, Supervision of Markets, Hong Kong Securities and Futures Commission. The review benefited from dialogue with the Indonesian authorities and private sector representatives 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.
Indonesia continues to implement over-the-counter derivatives reforms as it develops its domestic derivatives market.
This peer review examines the implementation of the G20 commitments on over-the-counter (OTC) derivatives market reforms in Indonesia.
The review finds that the Indonesian authorities have made some progress in implementing OTC derivatives reforms, while focusing on developing their domestic derivatives market. Reporting requirements have been in place for banks’ OTC foreign exchange and interest rate derivatives transactions and for other participants’ commodity derivatives transactions for many years, and there is effective sharing and use of the data collected among domestic authorities. Progress continues on central clearing requirements and margin requirements for non-centrally cleared derivatives (NCCDs), and the authorities are appropriately prioritising these areas over establishing platform trading. The report notes the authorities’ continued progress on these reforms despite pressures in the wake of the COVID-19 pandemic.
Notwithstanding this progress, the review concludes that further steps can be taken. These include:
improving the reporting, use and public transparency of OTC derivatives data, including a timeline for adopting unique global identifiers for entities, transactions and products;
addressing legal uncertainties relating to netting for derivatives transactions in bankruptcy in order to facilitate central clearing and margin requirements; and
implementing the remaining OTC derivatives reforms (central clearing of standardised OTC derivatives, margin requirements for NCCDs, and capital requirements for exposures to central counterparties) in an appropriately sequenced manner.
The peer review report includes recommendations to the Indonesian authorities in order to address these issues.
25 February 2021 | PDF full text (146 KB)
The FSB’s ambitious work programme for 2021 seeks to address vulnerabilities directly related to COVID-19 and to increase resilience of non-bank financial intermediation
This letter from the FSB Chair, Randal K. Quarles, to G20 Finance Ministers and Central Bank Governors ahead of their virtual meeting on 26 February notes the unprecedented challenges faced by the FSB, like many others, due to the outbreak of COVID-19 and the imposition of containment measures across the globe (the “COVID Event”). Nevertheless, over the past year, FSB members’ actions have demonstrated their responsiveness to crisis; coordination in action; and adaptability. These attributes remain as critical now, with a still uncertain pathway to a post-COVID world, as during the past year.
Against this backdrop, the FSB’s ambitious work programme for 2021 seeks to address vulnerabilities directly related to COVID-19 and to increase resilience of non-bank financial intermediation (NBFI). It also aims to support strong, sustainable, and balanced growth in a post-COVID world. Key priorities include:
These initiatives will provide a meaningful contribution as market participants and financial authorities seek to ensure that financial markets have the information and tools they need to manage risks, and seize opportunities, stemming from climate change.
The letter notes that the FSB, with its broad and diverse membership, is well positioned to tackle the global financial stability issues outlined above. The FSB will also continue to engage with external stakeholders through workshops, public consultations on key policy reports, and other mechanisms. The FSB’s work will result in robust analysis and proposals to help define a path forward and highlight issues that may arise as we continue to navigate these unpredictable times.
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