FSB publishes 2020 G-SIB list

11 November 2020

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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 (425 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:
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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

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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.

FSB Europe group discusses responses to COVID-19 and non-bank financial intermediation

4 November 2020

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Ref no: 44/2020

The Financial Stability Board (FSB) Regional Consultative Group (RCG) Europe held a virtual meeting today to discuss the challenges in addressing the evolving financial stability issues as a result of the COVID-19 pandemic, including the resilience of the banking sector in continuing to finance the real economy, as well as the findings of the FSB’s too-big-to-fail evaluation. Members also discussed the market turmoil in March that highlighted vulnerabilities in the non-bank financial intermediation sector (NBFI) related to liquidity mismatches, leverage and interconnectedness. Members reiterated the importance of understanding risk, risk transmission and policy implications in NBFI, and welcomed the FSB’s holistic review of the March turmoil that will be published later this month.

The members received an update on the FSB deliverables to the G20 Riyadh Summit on 21-22 November and the FSB’s work programme for 2021, including the Italian G20 Presidency’s financial sector priorities.

The Group also discussed work being undertaken by the Bank for International Settlements Innovation Hub which is focused on measures to leverage innovation to enhance the functioning of the global financial system.

Notes to editors

The RCG Europe is co-chaired by Katharine Braddick, Director General, Financial Services at the UK Treasury and Henry Ohlsson, Deputy Governor, Sveriges Riksbank. The membership of the FSB Regional Consultative Group for Europe includes financial authorities from Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Luxembourg, Netherlands, Norway, Poland, Portugal, Romania, Spain, Sweden, Switzerland, Ukraine, United Kingdom and the Group of International Finance Centre Supervisors. The European Commission, the European Central Bank, the ECB Banking Supervision and European Banking Authority also attended the meeting.

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.

The FSB is chaired by Randal K. Quarles, Vice Chairman, US Federal Reserve; its Vice Chair is Klaas Knot, President, 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. [←]

FSB Asia group discusses responses to COVID-19 and enhancing cross-border payments

3 November 2020

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Ref no: 43/2020

The Financial Stability Board (FSB) Regional Consultative Group (RCG) Asia held a virtual meeting today. Members discussed recent global and regional macroeconomic and financial market developments, including possible financial stability implications from the COVID-19 pandemic, steps to support a sound economic recovery and the need to develop exit strategies. Members considered the financial stability implications for emerging markets of broader financial market developments, including those stemming from the rising debt levels and access to dollar funding where conditions have eased thanks to coordinated action by central banks.

The RCG discussed the FSB’s deliverables to the G20 Riyadh Summit later this month and the FSB’s work programme for 2021, which will be agreed by the FSB Plenary and published later this year. The group also discussed issues they would like to see covered in the FSB’s work programme during the G20 Italian Presidency.

Last month, the FSB published a roadmap for enhancing cross-border payments which aims to make cross-border payment services, including remittances, faster, cheaper, more transparent and more inclusive. The group welcomed the roadmap and set out actions they plan to take to contribute to meeting the overall roadmap goals. They also discussed types of capacity building that may be useful to help address implementation challenges, and agreed on the need for industry engagement to help deliver the roadmap.

Notes to editors

The FSB RCG for Asia is co-chaired by Benjamin E. Diokno, Governor, Bangko Sentral ng Pilipinas and B.P. Kanungo, Deputy Governor, Reserve Bank of India. Membership of the RCG Asia comprises financial authorities from Australia, Brunei Darussalam, Cambodia, China, Hong Kong SAR, India, Indonesia, Japan, Korea, Malaysia, New Zealand, Pakistan, Philippines, Singapore, Sri Lanka, Thailand and Vietnam.

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.

The FSB is chaired by Randal K. Quarles, Vice Chairman, US Federal Reserve; its Vice Chair is Klaas Knot, President, 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. [←]

OECD Recommendation on Financial Literacy

29 October 2020

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Financial literacy has become a long-term policy priority in many countries and economies and is recognised as an important complement to market conduct, prudential regulation, and financial inclusion.

Over recent decades, the financial environment has evolved, giving greater opportunities to individuals to access finance as well as manage and plan their financial future. At the same time, the financial landscape has become more complex and digital financial services have introduced new challenges and risk factors. Demographic, socio-economic and financial developments have been further compounded by the socio-economic crisis resulting from the COVID-19 pandemic. Despite the growing complexity of the financial and risk landscape, recent financial literacy surveys conducted by the OECD have highlighted that many people – especially vulnerable groups – lack even basic financial knowledge and are ill-prepared to make savvy financial decisions. Because of these challenges, policies aimed at enhancing the knowledge of financial products and their associated risks, as well as policies strengthening consumers’ financial competences, their overall financial resilience and well-being are essential, within a robust financial consumer protection framework. 

The Recommendation was developed initially in the International Network on Financial Education (INFE). It updates and replaces four previous OECD Recommendations on financial education: the 2005 Recommendation of the Council on Principles and Good Practices for Financial Education and Awareness (OECD/LEGAL/0338), the 2008 Recommendation of the Council on Good Practices for Enhanced Risk Awareness and Education on Insurance Issues (OECD/LEGAL/0357), the 2008 Recommendation of the Council on Good Practices for Financial Education Relating to Private Pensions (OECD/LEGAL/0359), and the 2009 Recommendation of the Council on Good Practices on Financial Education and Awareness Relating to Credit (OECD/LEGAL/0370).  

It also draws on further work on financial education developed by the OECD that has been recognised in the G20 and Asia-Pacific Economic Co-operation (APEC).

The Recommendation is open to adherence by OECD Members and non-Members.  While not legally binding, practice accords it great moral force as representing the political will of OECD Members and non-Members having adhered to it (Adherents), on whom there is an expectation to do their utmost to fully implement it.

FSB welcomes TCFD status report

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Ref no: 42/2020

The Financial Stability Board (FSB) welcomed the publication today of the 2020 status report by the industry-led Task Force on Climate-related Financial Disclosures (TCFD), which reports on the further growth in TCFD-aligned disclosures by firms.

The TCFD was established by the FSB in 2015 to develop a set of voluntary, consistent disclosure recommendations for use by companies in providing information to investors, lenders and insurance underwriters about their climate-related financial risks. The industry members of the TCFD, who are drawn from a wide range of industries and countries from around the globe, finalised the recommendations in 2017 after extensive public engagement and consultation. They set out the disclosures that a wide range of users and preparers of financial filings have said are essential to understanding a company’s climate-related risks and opportunities.

Since then, more than 1,500 organisations have expressed their support for the TCFD recommendations, an increase of over 85% since the 2019 status report. Nearly 60% of the world’s 100 largest public companies support the TCFD, report in line with the TCFD recommendations, or both. The latest status report finds that disclosure of climate-related financial information aligned with the TCFD recommendations has steadily increased since the recommendations were published in 2017. However, the report highlights the continuing need for progress in improving levels of TCFD-aligned disclosures given the urgent demand for consistency and comparability in reporting.

In July the FSB’s stocktake on financial stability monitoring of climate risks concluded that work to quantify climate-related risks is hindered by a lack of consistent data on financial exposures to climate risks. Effective disclosures by firms can help to fill those data gaps.

FSB Chair Randal K. Quarles said: “The TCFD recommendations support greater consistency in climate-related risk disclosures by companies around the world, which will help to prevent market fragmentation.” He added: “The report shows that there has been significant momentum around adoption of and support for the TCFD’s recommendations, while also highlighting and making proposals to address challenges to more consistent and robust implementation.”

“The work that governments and businesses are doing to address the devastation caused by the coronavirus is also an opportunity to build a stronger, more resilient, and more sustainable economy – and transparency and disclosure have an important role to play,” said Michael R. Bloomberg, Chair of the Task Force and Founder of Bloomberg LP and Bloomberg Philanthropies. “The more companies know about their risks and opportunities related to climate change, and the more information investors have, the better we’ll be able to allocate resources and make progress – so it’s encouraging to see leaders in the public and private sector implementing the Task Force recommendations, as outlined in this report.”

The TCFD has also published today guidance on climate-related scenario analysis and on integrating climate-related risks into existing risk management processes, as well as a public consultation on forward-looking climate metrics for financial firms. The FSB has asked the TCFD to publish a further status report in September 2021 and undertake further analysis on the extent to which companies describe the financial impact of climate-related risks and opportunities on their businesses and strategies. The TCFD also plans to gain better insight into reporting practices of asset managers and asset owners to their clients and beneficiaries.

Notes to editors

The FSB is currently assessing the channels through which physical and transition risks could impact the financial system and how they might interact. Work is focused on the potential amplification mechanisms and cross-border effects, and to prioritising channels that could materialise in the short-to-medium term.

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.

2020 Status Report: Task Force on Climate-related Financial Disclosures

| PDF full text (5 MB)

This report from the Task Force on Climate-related Financial Disclosures (TCFD) is an annual report on TCFD-aligned disclosures by firms.

The TCFD was established by the FSB in 2015 to develop a set of voluntary, consistent disclosure recommendations for use by companies in providing information to investors, lenders and insurance underwriters about their climate-related financial risks. The industry members of the TCFD, who are drawn from a wide range of industries and countries from around the globe, finalised the recommendations in 2017 after extensive public engagement and consultation. They set out the disclosures that a wide range of users and preparers of financial filings have said are essential to understanding a company’s climate-related risks and opportunities.

Since then, more than 1,500 organisations have expressed their support for the TCFD recommendations, an increase of over 85% since the 2019 status report. Nearly 60% of the world’s 100 largest public companies support the TCFD, report in line with the TCFD recommendations, or both. The latest status report finds that disclosure of climate-related financial information aligned with the TCFD recommendations has steadily increased since the recommendations were published in 2017. However, the report highlights the continuing need for progress in improving levels of TCFD-aligned disclosures given the urgent demand for consistency and comparability in reporting. The TCFD found that:

  • On average across the TCFD recommendations, 42% of companies with a market capitalisation greater than $10 billion disclosed at least some information in line with each individual TCFD recommendation in 2019.
  • Nearly 60% of the world’s 100 largest public companies support the TCFD, report in line with the TCFD recommendations, or both.
  • Energy companies and materials and buildings companies are leading on disclosure, with an average level of TCFD-aligned disclosures of 40% for energy companies and 30% for materials and buildings companies in fiscal year 2019.
  • Expert users of disclosure identified the impact of climate change on a company’s business and strategy as the “most useful” information for financial decision-making. Notably, this information has the lowest level of disclosure across the recommendations, with just one in 15 companies making this disclosure.
  • Asset manager and asset owner reporting to their clients and beneficiaries is likely insufficient.

The report also provides a ‘roadmap’ for preparers through highlighting insights from expert users on which information is most useful for decision making.

The TCFD also published guidance on climate-related scenario analysis for non-financial firms and on integrating climate-related risks into existing risk management processes. Additionally, the TCFD published a public consultation on forward-looking climate metrics for financial firms; responses to the consultation are due by 27 January 2021.

The FSB has asked the TCFD to publish a further status report in September 2021 and undertake further analysis on the extent to which companies describe the financial impact of climate-related risks and opportunities on their businesses and strategies. The TCFD also plans to gain better insight into reporting practices of asset managers and asset owners to their clients and beneficiaries.

FSB virtual workshops on FinTech issues

28 October 2020 | PDF full text (272 KB)

Register for the FSB’s FinTech virtual workshops on 4 and 5 November from 13.00-15.00 (CET).

The objective of the workshop on 4 November is to present the FSB’s work on the use of supervisory (SupTech) and (RegTech) regulatory technology by authorities and regulated institutions. The workshop will consider issues raised in the FSB’s recent report on this topic.

The objective of the workshop on 5 November is to present the FSB’s work on the provision of financial services by BigTech firms in emerging market and developing economies, based on the FSB’s recent publication on this topic.