Reprioritisation of the FSB work programme

13 November 2020

The FSB re-prioritised its work programme for 2020 to focus on responding to the pandemic.

The COVID-19 crisis calls for a reprioritisation of FSB initiatives to maximise the value of FSB work during the current crisis and to use members’ resources effectively.

The reprioritisation of FSB projects takes into account the following criteria:

  • whether the work is relevant to current crisis management;

  • whether the evolution of the crisis may substantially change the findings (and the analysis could therefore benefit from a delay);

  • whether there are other important reasons to maintain the existing timing and/or scope of the project; and

  • whether postponing or scaling back the work could relieve COVID-related additional resource pressures on FSB members and their staff and on financial institutions and other stakeholders.

The FSB will publish its 2021 work programme in December.

Implementation and Effects of the G20 Financial Regulatory Reforms: 2020 Annual Report

| PDF full text (2 MB)

The report finds that the G20 reforms after the 2008 financial crisis have served the financial system well during the COVID-19 pandemic. Greater resilience of major banks at the core of the financial system has allowed the system largely to absorb, rather than amplify, the macroeconomic shock. Bold and decisive actions by authorities sustained the supply of credit to the real economy and helped maintain global financial stability.

Given the pandemic, there has been limited additional progress implementing the G20 reforms during the last year. Regulatory adoption of several core Basel III elements has generally been timely to date, but there have been delays in implementing other Basel III standards. Substantial work remains to operationalise resolution planning for systemically important banks and to implement effective resolution regimes for insurers and central counterparties.

The FSB and standard-setting bodies (SSBs) have extended implementation deadlines for certain international reforms to provide additional capacity for firms and authorities to respond to the COVID-19 shock. In addition, authorities in many jurisdictions have taken regulatory and supervisory measures to alleviate the economic impact of COVID-19 on the financial system. 

The pandemic represents the first major global test of the post-crisis financial system, and an opportunity to examine whether reforms have worked as intended. The FSB and SSBs will carry out further work to identify potential lessons learned for international standards.

Furthermore, the COVID experience has demonstrated once again how interconnected the global financial system is. The FSB and SSBs will continue to promote approaches to deepen international cooperation, coordination and information-sharing, with the support of the G20.

The report includes a colour-coded dashboard that summarises the status of implementation across FSB jurisdictions for priority reform areas.

Implementation of reforms in priority areas by FSB jurisdictions (as of October 2020)

Implementation of reforms in priority areas by FSB jurisdictions (as of October 2020). Click for full size.

 

FSB publishes annual report on implementation and effects of financial regulatory reforms

Press enquiries:
+41 61 280 8138
[email protected]
Ref no: 47/2020

The Financial Stability Board (FSB) today published its 2020 report on the implementation and effects of the G20 financial regulatory reforms.

The report, which will be delivered to G20 Leaders ahead of their Summit next week, finds that the G20 reforms after the 2008 financial crisis have served the financial system well during the COVID-19 pandemic. Greater resilience of major banks at the core of the financial system has allowed the system largely to absorb, rather than amplify, the macroeconomic shock. Bold and decisive actions by authorities sustained the supply of credit to the real economy and helped maintain global financial stability.

Given the pandemic, there has been limited additional progress implementing the G20 reforms during the last year. Regulatory adoption of several core Basel III elements has generally been timely to date, but there have been delays in implementing other Basel III standards. Substantial work remains to operationalise resolution planning for systemically important banks and to implement effective resolution regimes for insurers and central counterparties.

The FSB and standard-setting bodies (SSBs) have extended implementation deadlines for certain international reforms to provide additional capacity for firms and authorities to respond to the COVID-19 shock. In addition, authorities in many jurisdictions have taken regulatory and supervisory measures to alleviate the economic impact of COVID-19 on the financial system. 

The pandemic represents the first major global test of the post-crisis financial system, and an opportunity to examine whether reforms have worked as intended. The FSB and SSBs will carry out further work to identify potential lessons learned for international standards.

Furthermore, the COVID experience has demonstrated once again how interconnected the global financial system is. close international cooperation is critical given the uncertainty about the pandemic, and necessary for the full, timely and consistent implementation of the reforms, which will help to further strengthen the resilience of the financial system. The FSB and SSBs will continue to promote approaches to deepen international cooperation, coordination and information sharing, with the support of the G20.

Notes to editors

This report includes an implementation dashboard that summarises, in a colour-coded table, the status of implementation across FSB jurisdictions for priority reform areas. The report also presents the main findings of the FSB consultative report on the evaluation on the effects of too-big-to-fail reforms for systemically important banks.

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.

FSB virtual workshop on the use of supervisory and regulatory technology by authorities and regulated institutions

On 4 November the FSB hosted a virtual workshop to present its work on the use of supervisory (SupTech) and regulatory (RegTech) technology by authorities and regulated institutions. The workshop discussed market developments and financial stability implications raised in the FSB’s recent report on this topic .

2020 list of global systemically important banks (G-SIBs)

11 November 2020 | PDF full text (165 KB)

The 2020 list of global systemically important banks (G-SIBs) uses end-2019 data and an assessment methodology designed by the Basel Committee on Banking Supervision (BCBS).

Compared with the list of G-SIBs published in 2019, the number of banks identified as G-SIBs remains 30. The assignment of G-SIBs to buckets, in the list published today, determines the higher capital buffer requirements that will apply to each G-SIB from 1 January 2022. Three banks have moved to a lower bucket: JP Morgan Chase has moved from bucket 4 to bucket 3, Goldman Sachs and Wells Fargo have moved from bucket 2 to bucket 1. One bank has moved to a higher bucket: China Construction Bank has moved from bucket 1 to bucket 2.

FSB publishes 2020 G-SIB list

Press enquiries:
+41 61 280 8138
[email protected]
Ref no: 46/2020

The Financial Stability Board (FSB) today published the 2020 list of global systemically important banks (G-SIBs) using end-2019 data and an assessment methodology designed by the Basel Committee on Banking Supervision (BCBS).

The 30 banks on the list remain the same as the 2019 list.

FSB member authorities apply the following requirements to G-SIBs:

  • Higher capital buffer: The G-SIBs are allocated to buckets corresponding to higher capital buffers that they are required to hold by national authorities in accordance with international standards. Compared with the 2019 list, three banks have moved to a lower bucket (JP Morgan has moved from bucket 4 to 3 and Goldman Sachs and Wells Fargo have moved from bucket 2 to 1) and one bank has moved to a higher bucket (China Construction Bank from bucket 1 to 2).
  • Total Loss-Absorbing Capacity (TLAC): G-SIBs are required to meet the TLAC standard, alongside the regulatory capital requirements set out in the Basel III framework. The TLAC standard began being phased in from 1 January 2019 for G-SIBs identified in the 2015 list that continued to be designated as G-SIBs.
  • Resolvability: These include group-wide resolution planning and regular resolvability assessments. The resolvability of each G-SIB is also reviewed in a high-level FSB Resolvability Assessment Process (RAP) by senior regulators within the firms’ Crisis Management Groups. 
  • Higher supervisory expectations: These include supervisory expectations for risk management functions, risk data aggregation capabilities, risk governance and internal controls.

BCBS today published updated denominators used to calculate banks’ scores and the values of the underlying twelve indicators for each bank in the assessment sample. The BCBS also published the cutoff score used to allocate the G-SIBs to buckets, as well as updated links to public disclosures of all banks in the sample.

A new list of G-SIBs will next be published in November 2021.

Notes to editors

The requirements for G-SIBs summarised above are “higher” in the sense that they are additional to the minimum standards that apply to all internationally active banks under the Core Principles of the BCBS.

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.

Regulatory and Supervisory Issues Relating to Outsourcing and Third-Party Relationships: Discussion paper

9 November 2020 | PDF full text (448 KB)

Summary of document history

Summary of document history

This discussion paper considers regulatory and supervisory issues relating to outsourcing and third-party relationships. It will facilitate a discussion on current regulatory and supervisory approaches to the management of outsourcing and third-party risks.

Financial institutions have relied on outsourcing and other third-party relationships for decades. However, in recent years, the extent and nature of interactions with a broad and diverse ecosystem of third parties has evolved, particularly in the area of technology. The financial sector’s recent response to COVID-19 highlights the benefits as well as the challenges of managing the risks of financial institutions’ interactions with third parties. The pandemic may have also accelerated the trend towards greater reliance on certain third-party technologies.

The discussion paper identifies a number of issues and challenges. For instance, financial institutions have to ensure that their contractual agreements with third parties grant to them, as well as to supervisory and resolution authorities, appropriate rights to access, audit and obtain information from third parties. These rights can be challenging to negotiate and exercise, particularly in a multi-jurisdictional context. The management of sub-contractors and supply chains is another challenge that was highlighted in the context of financial institutions’ response to COVID-19.

There is a common concern about the possibility of systemic risk arising from concentration in the provision of some outsourced and third-party services to financial institutions. These risks may become higher as the number of financial institutions receiving critical services from a given third party increases. Where there is no appropriate mitigant in place, a major disruption, outage or failure at one of these third parties could create a single point of failure with potential adverse consequences for financial stability and/or the safety and soundness of multiple financial institutions. Given the cross-border nature of this dependency, supervisory authorities and third parties could particularly benefit from enhanced dialogue on this issue.

Responses to the public consultation should be sent to [email protected] by 8 January 2021 with “Outsourcing and third-party relationships”. Consultation responses will help facilitate a discussion on current regulatory and supervisory approaches to the management of outsourcing and third-party risks. Consultation responses will be published on the FSB’s website unless respondents expressly request otherwise.

FSB consults on regulatory and supervisory issues relating to outsourcing and third-party relationships

Press enquiries:
+41 61 280 8138
[email protected]
Ref no: 45/2020

The Financial Stability Board (FSB) today published a discussion paper for public consultation, on Regulatory and Supervisory Issues Relating to Outsourcing and Third-Party Relationships. The discussion paper draws on findings from a survey conducted among the FSB members.

Financial institutions have relied on outsourcing and other third-party relationships for decades. However, in recent years, the extent and nature of interactions with a broad and diverse ecosystem of third parties has evolved, particularly in the area of technology. The financial sector’s recent response to COVID-19 highlights the benefits as well as the challenges of managing the risks of financial institutions’ interactions with third parties. The pandemic may have also accelerated the trend towards greater reliance on certain third-party technologies.

The discussion paper identifies a number of issues and challenges. For instance, financial institutions have to ensure that their contractual agreements with third parties grant to them, as well as to supervisory and resolution authorities, appropriate rights to access, audit and obtain information from third parties. These rights can be challenging to negotiate and exercise, particularly in a multi-jurisdictional context. The management of sub-contractors and supply chains is another challenge that was highlighted in the context of financial institutions’ response to COVID-19.

There is a common concern about the possibility of systemic risk arising from concentration in the provision of some outsourced and third-party services to financial institutions. These risks may become higher as the number of financial institutions receiving critical services from a given third party increases. Where there is no appropriate mitigant in place, a major disruption, outage or failure at one of these third parties could create a single point of failure with potential adverse consequences for financial stability and/or the safety and soundness of multiple financial institutions. Given the cross-border nature of this dependency, supervisory authorities and third parties could particularly benefit from enhanced dialogue on this issue.

The FSB welcomes comments and responses to the questions set out in the discussion paper by 8 January 2021. Consultation responses will help facilitate a discussion on current regulatory and supervisory approaches to the management of outsourcing and third-party risks. Consultation responses will be published on the FSB’s website unless respondents expressly request otherwise.

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.

Guidance on Risk Management and Internal Control System of Deposit Insurers

6 November 2020

View the Standard

This Guidance Paper investigates by means of an extended survey the most recent experiences and practices in risk management and internal control systems of deposit insurers.

A number of guidance points are set on risk management for deposit insurance. These reflect on deposit insurers’ variety in environment and ca be applied without impeding operational usefulness and deposit insurers’ need for flexibility.

The Guidance Paper list the essential risk management functions a deposit insurer should have in place, with regards to its size, mandate, influence and other features of its activity. The Guidance Points are based on the principle of proportionality since the intention is not to identify a maximum target for each individual deposit insurer, but rather a minimum requirement.

The level of development or maturity of the framework will then depend on the specific features of each deposit insurer. The Guidance Points consist of a set of recommendations for the following areas of risk management: i) Governance, ii) Risk Management Process and Internal Control System, iii) Communication and Reporting, and iv) Monitoring and Improvement.