Recommendations for Regulating and Supervising Bank and Non-bank Payment Service Providers Offering Cross-border Payment Services: Final report

12 December 2024 | PDF full text (625 KB)

Summary of document history

Summary of document history

Inconsistencies in the legal, regulatory, or supervisory regimes applied to banks and non-banks that provide cross-border payment services can be an obstacle towards achieving cheaper, faster and easily accessible cross-border payments.

Individual jurisdictions have taken varying and sometimes inconsistent approaches to regulating and supervising bank and non-bank payment services providers (PSPs) offering cross-border payments. Such inconsistencies can result in complex compliance processes, increasing the costs and reducing the processing speed.

This report discusses the role of banks and non-banks in cross-border payments, as well as the relevant frictions and risks. The report sets out policy recommendations to strengthen consistency in the regulation and supervision of banks and non-banks in their provision of cross-border payment services in a way that is proportionate to the risks associated with such activities. This approach aims to  reduce the prospect of regulatory arbitrage by establishing a level playing field that takes into account differences in business models and risk profiles.

FSB Recommendations

Recommendation 1: Competent authorities should conduct risk assessments of the cross-border payments sector, the aim of which should be to identify, understand and assess the risks associated with PSPs active within the authorities’ jurisdiction in cross-border payment services.

Recommendation 2: Based on the findings of the payment sector risk assessments, competent authorities should review existing regulatory, supervisory, and oversight regimes to ensure that the regimes: 1) address all the key risks identified; 2) are proportional to the risks identified, with particular attention to operational risks (e.g. fraud, cyber and third-party risks), resilience and financial crime risks, and 3) are applied consistently and in coordination with all relevant competent authorities across the sector. Competent authorities should consider undertaking or seeking adjustments to laws, regulations, and supervision and oversight models as needed.

Recommendation 3: Competent authorities’ regulatory and supervisory regimes related to cross-border payments should be designed to promote consumer protection and address consumer harms.

Recommendation 4: Competent authorities should develop, publish, and communicate payments-related supervisory and oversight expectations to promote safe and efficient payment services, including the guidance relating to application of the risk-based approach.

Recommendation 5: Competent authorities should: 1) review licensing or registration criteria for risk-proportionate requirements, including measures to promote consumer protection and address new services such as account information services, payment initiation services, digital wallets, and the provision of services through agents and other intermediaries; and, if necessary, 2) adjust the licensing or registration processes for PSPs to incorporate requirements such as conducting fit and proper tests, reviews of AML/CFT compliance programs and oversight of agents and other intermediaries.

Recommendation 6: Competent authorities both within and across jurisdictions should, where applicable, implement or expand cooperative arrangements for information sharing to support access to relevant information and data for comprehensively assessing risks as well as the sources of frictions and, when appropriate, supporting regulatory or supervisory action.

Recommendations for Regulating and Supervising Bank and Non-bank Payment Service Providers Offering Cross-border Payment Services: Overview of responses to consultation

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On the 16 July the FSB published the consultative report Recommendations for Regulating and Supervising Bank and Non-bank Payment Service Providers Offering Cross-border Payment Services.

The FSB received 21 responses, from North America, Asia-Pacific and Europe. The responses received spanned various entities in the cross-border payments ecosystem such as banks, non-bank payment service providers (PSPs), credit card schemes and clearing houses.

This document summarises the comments raised in the public consultation and sets out the main changes made to the final report in order to address them.

FSB issues recommendations related to data flows and regulation and supervision of cross-border payments

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Ref: 38/2024

  • Recommendations address frictions in data flows related to cross-border payments and promote a level playing field between bank and non-bank providers of payment services.
  • Recommendations form part of the FSB’s efforts to prioritise work and strengthen private-sector participation under the G20 cross-border payments roadmap.
  • The FSB is inviting market stakeholders to join its Taskforce on Legal, Regulatory, and Supervisory matters and is establishing a new Forum on Cross-Border Payments Data to take these recommendations forward in a coordinated manner and encourage cross-sectoral collaboration.

The Financial Stability Board (FSB) published today its finalised recommendations to promote greater alignment in data frameworks related to cross-border payments and consistency in the regulation and supervision of bank and non-bank payment service providers. These recommendations advance key actions from the G20 Roadmap to address legal, supervisory, and regulatory issues in cross-border payments. As part of these efforts and to enhance private sector engagement, the FSB is inviting market stakeholders in cross-border payments to join its Taskforce on Legal, Regulatory, and Supervisory matters (LRS Taskforce).

Policy recommendations to promote greater alignment and interoperability in data frameworks related to cross-border payments

The transfer of data across borders is essential to the functioning of cross-border payments. Frictions from data frameworks (i.e. the range of laws, rules and regulatory requirements for collecting, storing and managing data) can pose significant challenges to improving the cost, speed, transparency and accessibility of cross-border payments. The FSB’s recommendations aim to address identified frictions, while maintaining the safety and security of cross-border payments and upholding the objectives of protecting the privacy of individuals and fostering innovation. Identified frictions include different data requirements in payments that interfere with the smooth processing of cross-border payments, restrictions on data sharing that impede the ability to safely process cross-border payments, and increased costs due to data storage and handling requirements.

To take forward these recommendations in a coordinated manner and to identify emerging issues that should be addressed, the FSB is establishing a Forum on Cross-Border Payments Data. The Forum will be comprised of public-sector stakeholders covering payments, anti-money laundering and countering the financing of terrorism (AML/CFT), sanctions, and data privacy and protection. The Forum will also establish a private sector advisory group.

Policy recommendations to strengthen consistency in regulating and supervising banks and non-banks providing cross-border payment services

Advances in technology have led to an increasing number and variety of payment services providers (PSPs) and the services they offer. In the absence of comprehensive international standards applicable to non-bank PSPs’ provision of cross-border payment services, jurisdictions have taken varying approaches to regulating and supervising bank and non-bank PSPs offering these services. These recommendations aim to ensure quality and consistency in the legal, regulatory and supervisory regimes of banks and non-banks in their provision of cross-border payment services in a way that is proportionate to the risks associated with such activities. This approach reduces the likelihood of regulatory arbitrage by establishing a level playing field for both banks and non-bank PSPs, despite differences in business models and risk profiles. Greater consistency in the regulation and supervision of banks and non-banks providing cross-border payment services can foster lower costs, higher delivery speed, and better financial access and transparency.

Notes to editors

Both reports reflect public feedback received by the FSB on the consultative versions issued in July 2024. The FSB also published today overviews of the responses to these public consultations.

The G20 has made enhancing cross-border payments a priority to achieve faster, cheaper, more transparent and more inclusive cross-border payments, while maintaining their safety and security. In 2020, the FSB, in coordination with the Bank for International Settlements’ Committee on Payments and Market Infrastructures (CPMI) and other international organisations and standard-setting bodies, developed a Roadmap to address these challenges. In October 2022, G20 Finance Ministers and Central Bank Governors endorsed a plan for prioritising work under the Roadmap and for enhancing engagement with the private sector and jurisdictions beyond the G20. In February 2023, the FSB outlined three priority themes to drive the Roadmap forward. The themes cover: payment system interoperability and extension; legal, regulatory and supervisory frameworks; and cross-border exchange and message standards.

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 Financial Stability Board invites cross-border payments market stakeholders to join its Taskforce on Legal, Regulatory and Supervisory matters

The Financial Stability Board (FSB) invites firms that offer cross-border payment services and relevant industry associations to nominate senior representatives to serve on the FSB’s Taskforce on Legal, Regulatory, and Supervisory matters (LRS Taskforce).

Extensive engagement with the private sector has been integral to achieving the goals of the G20 Roadmap for faster, cheaper, more transparent and accessible cross-border payments. In early 2023, the FSB established the LRS Taskforce to serve as a mechanism for regular engagement between the public and private sectors. The LRS Taskforce is chaired by Carolyn Rogers, Senior Deputy Governor of the Bank of Canada.

The LRS Taskforce has provided input and feedback on a number of key policy issues for cross-border payments, including issues arising from data frameworks and bank and non-bank supervision in cross-border payments. In addition, the LRS Taskforce has contributed to the identification of areas of particular relevance for the FSB’s work programme in 2025.

Now that much of the policy development is completed, focus will turn to implementation of the policy recommendations as well as to addressing any other legal, regulatory and supervisory frictions that have been identified as significant impediments to achieving the goals of the G20 Roadmap. The FSB is renewing the LRS Taskforce membership to support this work.

The renewed taskforce is expected to have 30-40 members (approximately two-thirds private sector and one-third public sector). The FSB is seeking to ensure wide representation in terms of jurisdictions, regions, private-sector institutional types and business models, public-sector authorities and international organisations. The taskforce will meet approximately four times a year; the timing of the meetings will be driven by the FSB’s cross-border payments work plan. Most meetings will be virtual but at least one meeting will be held in person each year.

Private-sector nominees should be senior managers with significant experience and direct responsibilities related to cross-border payments in the areas of compliance, legal, cross-border operations or risk management. Nominees should be able to commit sufficient time and organise resources from within their organisation to support the work of the LRS Taskforce until at least the end of 2026.

The Taskforce on Cross-border Payments Interoperability and Extension (PIE Taskforce) of the Bank for International Settlements’ Committee on Payments and Market Infrastructures (CPMI) is complementary to the LRS Taskforce. Institutions on the PIE taskforce may be considered also for LRS membership.

FSB notes significant progress in monitoring, regulating and supervising crypto-asset activities in France

11 December 2024

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Ref: 37/2024

  • Peer review highlights significant progress by the French authorities to enhance the monitoring, regulation and supervision of crypto-asset markets in recent years.
  • France’s PACTE Law has successfully brought most of crypto activities within the regulatory perimeter.
  • Review recommends further steps to facilitate the transition to the EU MiCAR regime, strengthen enforcement and promote cross-border cooperation and information sharing.

The Financial Stability Board (FSB) today published its Peer Review of France, examining France’s regulation and supervision of crypto-asset activities.

The French authorities have made significant progress in monitoring, regulating and supervising crypto-assets in recent years. They successfully brought a large part of the crypto-asset market into the regulatory perimeter through the 2019 Action Plan for Business Growth and Transformation (PACTE Law). The PACTE Law introduced registration and licensing regimes for digital asset service providers, enabled authorities to build up their regulatory expertise in crypto-assets, and fostered regulatory literacy and awareness for the industry.

Notwithstanding these achievements, the review notes further steps can be taken to strengthen the regulatory framework for crypto-assets and stablecoins. These include: facilitating a smooth transition to the European Union’s Markets in Crypto-Asset Regulation (MiCAR); strengthening enforcement efforts; and promoting cross-border cooperation and information sharing.   

Ryozo Himino, Chair of the FSB’s Standing Committee on Standards Implementation (SCSI) that oversaw the preparation of the peer review said: “Regulatory authorities around the world are in the process of implementing the FSB’s 2023 regulatory framework for crypto-asset activities. The French authorities’ experience in introducing and adjusting their framework for crypto-assets and stablecoins will give those authorities invaluable insights on possible implementation challenges and ways to address them.”  

Notes to editors

The peer review focused on French authorities’ steps to implement reforms for the regulation and supervision of crypto-asset activities. It also took into account the recent adoption of the FSB’s high-level recommendations for the regulation, supervision, and oversight of crypto-asset activities and markets and global stablecoin arrangements, and France’s ongoing transition to the European Union’s Markets in Crypto-Asset Regulation (MiCAR).

The report was prepared by a team of experts from FSB member institutions and led by Emily Shepperd, Chief Operating Officer and Executive Director, Authorisations, Financial Conduct Authority, United Kingdom. The review benefited from dialogue with the French authorities and market participants as well as the FSB’s Standing Committee on Standards Implementation (SCSI).

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 country and thematic peer reviews of its member jurisdictions. As part of this commitment, France volunteered to undergo a peer review in 2023-2024. A schedule of country peer reviews, as well as all completed 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 Klaas Knot, President of De Nederlandsche Bank. The FSB Secretariat is located in Basel, Switzerland and hosted by the Bank for International Settlements.

Peer Review of France

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France has successfully managed to bring a large part of the crypto-asset market within the regulatory perimeter.

This Peer Review of France looks at the country’s progress in regulating and supervising crypto-asset activities, including stablecoins.

In France, the main use cases of crypto-assets to date are related to investment and trading, with stablecoins being used mostly as a medium of exchange for crypto-to-crypto transactions. Their use for payments remains limited, and so are the direct links between traditional finance and the crypto-asset market.

The French authorities have made significant progress in monitoring, regulating and supervising crypto-asset markets. They have established a regular mechanism to monitor market developments and risk trends as part of the financial stability framework of the Banque de France. They also successfully brought a large part of the crypto-asset market into the regulatory perimeter by introducing registration and licencing for digital asset service providers, and have enhanced their regime over time.

Notwithstanding these achievements, further steps can be taken to strengthen the regulatory framework for crypto-assets and stablecoins. These include facilitating a smooth transition to the European Union’s Markets in Crypto-Asset Regulation (MiCAR) regime, strengthening enforcement efforts and promoting cross-border cooperation and information sharing.

Liquidity Preparedness for Margin and Collateral Calls: Final report

10 December 2024 | PDF full text (529 KB)

Summary of document history

Summary of document history

Whilst margin and collateral calls are a necessary protection against counterparty risk, they can also amplify the demand for liquidity by market participants if they are unexpected in times of stress and affect a large enough part of the market.

Recent episodes of market stress, including the March 2020 market turmoil, the Archegos failure in March 2021, the 2022 turmoil in certain commodities markets, and the September 2022 issues experienced by many pooled liability-driven investment funds, underscore the importance of margin and collateral calls to financial stability. During these episodes the sudden increases in margin and collateral requirements were sometimes significant in scale and frequency, stretching some market participants’ ability to manage the associated liquidity risks.

These events illustrate that whilst margin and collateral calls are a protection against counterparty risk, they can also amplify the demands for liquidity across markets and market participants if they are unexpected in times of stress and affect a large enough part of the market. The increase in margin and collateral calls can impact market participants differently depending on the size of their positions and level of liquidity preparedness. This highlights the need for market participants to be well prepared to meet these calls.

This report sets out steps to enhance the liquidity preparedness of non-bank market participants for margin and collateral calls in centrally and non-centrally cleared derivatives and securities markets. It forms part of the FSB’s work programme on NBFI.

FSB policy recommendations

Liquidity risk management practices and governance

Recommendation 1: Market participants should incorporate the assessment of liquidity risks arising from margin and collateral calls in their liquidity risk management and governance frameworks.

Recommendation 2: Market participants should define their tolerance for liquidity risk arising from margin and collateral calls and establish contingency funding plans to ensure that liquidity needs arising from these calls can be met, including under extreme but plausible stressed conditions.

Recommendation 3: Market participants should regularly review and update their liquidity risk framework to ensure that liquidity risks arising from margin and collateral calls are robustly managed and mitigated, particularly under extreme but plausible stress scenarios.

Liquidity stress testing and scenario design

Recommendation 4: Market participants should conduct liquidity stress tests to identify sources of potential liquidity strains caused by margin and collateral calls, and to ensure a level of resilience consistent with their established liquidity risk tolerance. The stress test results should be used to calibrate adequate, diverse, and reliable sources of liquidity and collateral arrangements.

Recommendation 5: Robust stress testing should analyse a range of extreme but plausible liquidity stresses caused by changes in margin and collateral calls, as well as market participants’ overall liquidity position.

Collateral management practices

Recommendation 6: Market participants should have resilient and effective operational processes and collateral management practices.

Recommendation 7: Market participants should maintain sufficient levels of cash and readily available as well as diverse liquid assets and establish appropriate collateral arrangements to meet margin and collateral calls.

Recommendation 8: Market participants should have active, transparent, and regular interactions with their counterparties and third-party service providers in collateralised transactions to ensure adequate operational resilience with respect to spikes in margin and collateral calls under stressed conditions.

Liquidity Preparedness for Margin and Collateral Calls: Overview of responses to the consultation

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Summary of document history

Summary of document history

On 17 April 2024, the FSB published a consultation report with policy recommendations aimed at enhancing liquidity preparedness for margin and collateral calls among non-bank market participants.

The FSB received 25 responses to the consultation, which ended on 18 June 2024. Respondents included a broad range of market participants including trade associations, which represent a diverse range of sectors including global financial institutions, asset management, insurance, securities exchanges, derivatives markets, money market funds, hedge funds, alternative investments, and energy commodity trading. In addition, responses were received from regulated financial institutions, commodities firms, and others.

This note presents a summary of the responses received and changes made in response to those comments.

FSB issues policy recommendations to enhance non-bank market participants’ preparedness for margin and collateral calls

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Ref: 36/2024

  • Policy recommendations aim to enhance the liquidity preparedness of non-bank market participants for margin and collateral calls in centrally and non-centrally cleared derivatives and securities markets.
  • Recommendations follow public consultation and focus on liquidity risks arising from spikes in margin and collateral calls, including during times of market-wide stress.
  • Recommendations cover liquidity risk management and governance, stress testing and scenario design, and collateral management practices of non-bank market participants.

The Financial Stability Board (FSB) today published policy recommendations to enhance the liquidity preparedness of non-bank market participants for margin and collateral calls in centrally and non-centrally cleared derivatives and securities markets (including securities financing such as repo).

The recommendations respond to calls for regulatory adjustments to deal with liquidity strains in the non-bank financial intermediation (NBFI) sector arising from spikes in margin and collateral calls during market stress. The recommendations are intended to build on and complement rules and regulations for liquidity risk management and governance that already exist in many sectors and jurisdictions.

Derivatives and securities activities can expose market participants to margin and collateral calls. Recent episodes of market stress, including the March 2020 market turmoil, the Archegos failure in March 2021, the 2022 turmoil in certain commodities markets, and the September 2022 issues experienced by many pooled liability-driven investment (LDI) funds, underscore the importance of margin and collateral calls to financial stability and the need for market participants to be prepared to meet these calls.

The FSB’s eight policy recommendations cover liquidity risk management and governance, stress testing and scenario design, and collateral management practices of non-bank market participants, focussing on liquidity risks arising from spikes in margin and collateral calls  during times of market-wide stress. The recommendations cover both centrally and non-centrally cleared derivatives and securities markets and apply to a broad range of non-bank market participants that may face margin and collateral calls, including insurance companies, pension funds, hedge funds, other investment funds, and family offices.

Non-financial entities such as commodities traders can also have material derivatives and securities exposures. While the recommendations do not directly apply to such entities, they and their counterparties could use the recommendations to improve their liquidity management and governance practices.

Notes to editors

This work forms part of the FSB’s work programme on enhancing the resilience of NBFI. It follows up on the findings of a review of margining practices conducted in 2022 by the Basel Committee on Banking Supervision (BCBS), Bank for International Settlements’ Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO). The review recommended that the FSB undertake additional international work on enhancing liquidity preparedness of market participants and on regulatory data gaps, so that authorities can better monitor the NBFI sector’s liquidity preparedness.

The FSB launched a public consultation on its proposed recommendations to enhance the liquidity preparedness of non-bank market participants for margin and collateral calls during times of market-wide stress in April 2024. The overview of the responses to this consultation has also been published today.

Further details on the FSB’s work programme to enhance resilience in NBFI can be found in its latest progress report.

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.

FSB Sub-Saharan Africa Group discusses financial scams and fraud prevention, and crisis preparedness and resolution

6 December 2024

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Ref: 35/2024

The Financial Stability Board (FSB) Regional Consultative Group for Sub-Saharan Africa (RCG SSA) met on 6 December in Cape Town. The meeting was hosted by the South African Reserve Bank.

The meeting started with an overview of the FSB’s work programme for 2025 and its planned contributions to South Africa’s G20 Presidency. A key focus in 2025 will be on implementation of the FSB recommendations on crypto-assets and global stablecoins and on enhancing cross-border payments globally.

Participants exchanged views on global and regional vulnerabilities in the financial system, including perspectives on the financial stability outlook. They noted that long-standing vulnerabilities remain, such as high debt levels in governments, corporates and households. Particular attention was devoted to the challenges regional authorities face in monitoring risks from non-bank financial intermediation. In that respect, members looked forward to the forthcoming FSB Global monitoring report on non-bank financial intermediation for 2024.

An important area of concern is the increasing number of financial scams and fraud cases worldwide. Participants explored the scope for cross-border cooperation, including through the FSB and other international organisations, to protect investors and consumers from malicious online activities, ensure the proper functioning of capital markets and promote financial stability. They shared experiences on preventive and enforcement measures implemented in response to these disruptions and discussed the role that artificial intelligence (AI) can play in fraud detection and prevention.

Finally, members discussed crisis preparedness and resolution planning for financial institutions in light of the growing interconnectedness within the financial system. Members noted the need to be prepared for failures of banks beyond globally systemic important banks, as noted in the FSB’s recent statement on the importance of resolution planning and loss-absorbing capacity for banks which may be systemically significant or critical if they fail. Members further noted the increasing significance of regionally systemic banks and emphasised the need for African regulators to collaborate in crisis preparedness work. They also exchanged views on promoting cross-border cooperation and information sharing during crises, for example through crisis management groups, as set out in the FSB’s Key Attributes for Effective Resolution Regimes for Financial Institutions.

Notes to editors

The FSB Regional Consultative Group for Sub-Saharan Africa is co-chaired by Lesetja Kganyago, Governor, South African Reserve Bank and Denny Kalyalya, Governor, Bank of Zambia. Membership includes financial authorities from Angola, Botswana, Ghana, Kenya, Mauritius, Namibia, Nigeria, South Africa and Tanzania, as well as the Central Bank of West African States based in Senegal. 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 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.

  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. ↩︎