FSB Chair updates G20 on action to harness benefits from financial technology and innovation

14 October 2020

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Ref no: 36/2020

The Financial Stability Board (FSB) today published a letter from its Chair, Randal K. Quarles, to G20 Finance Ministers and Central Bank Governors ahead of their virtual meeting today.

The letter notes the extraordinary challenges for the global financial system this year. The FSB will provide a comprehensive report on the financial stability implications of, and policy responses to, the COVID Event to the November G20 Summit, including a holistic review of the market turmoil in March. The holistic review will inform future steps of the FSB in 2021 under the Italian G20 Presidency to improve the resiliency of the NBFI sector while preserving its benefits.

Meanwhile, the FSB has not lost sight of important ongoing work in financial innovation, payments systems, cyber resilience, and market fragmentation. The FSB is submitting to the G20 work addressing issues at the frontier of financial innovation and technology, including:

  • a toolkit of effective practices that the FSB encourages regulators and financial institutions to use to respond to and recover from the negative impacts of a cyber incident;
  • an examination of the impact that BigTech firms have on emerging market and developing economies;
  • an assessment of how SupTech and RegTech technologies may improve authorities’ supervisory capabilities and institutions’ regulatory compliance; and
  • high-level recommendations for regulatory, supervisory, and oversight responses to so-called “stablecoin” instruments, by applying the lens of ‘same activity – same risk – same rules’.

This work aims to provide the regulatory community with additional tools to quickly assess and mitigate the risks posed by such changes without tempering the benefits. It also reflects the fundamental role international coordination plays in creating a resilient financial system that seeks to avoid harmful market fragmentation.

The letter also describes the FSB’s high-level roadmap for developing cross-border payment systems and processes that are faster, more inclusive, less expensive, and more transparent. While the actions that form the overall roadmap are ambitious they are achievable with the continued support from the G20.

In addition, the FSB continues is working on a variety of fronts to promote a resilient and integrated global financial system. The financial stability implications of climate-related risks remain a topic of great interest for the FSB’s membership and the international community. In addition, the FSB continues with other global standard-setting bodies in efforts to address market fragmentation.

The full list of reports delivered to today’s G20 meeting is as follows:

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.

Enhancing Cross-border Payments: Stage 3 roadmap

13 October 2020 | PDF full text (715 KB)

This report provides a roadmap to enhance cross-border payments. The G20 has made enhancing cross-border payments a priority during the Saudi Arabian Presidency. Faster, cheaper, more transparent and more inclusive cross-border payment services, including remittances, while maintaining their safety and security, would have widespread benefits for citizens and economies worldwide, supporting economic growth, international trade, global development and financial inclusion.

This report presents a roadmap to address the key challenges often faced by cross-border payments and the frictions in existing processes that contribute to these challenges. These challenges, namely high costs, low speed, limited access and insufficient transparency, affect end-users and service providers, though not all in the same way. Individuals and small companies face particular challenges with retail cross-border payments, and financial inclusion remains a challenge for many, especially in emerging market and developing economies. Low-value payments may incur high fees as a percentage of the amount sent and face cumbersome processes. The unbanked and individuals and firms from fragile states are amongst those who may not be able to access payment services at all.

This roadmap has been developed by the FSB, in coordination with the Committee on Payments and Market Infrastructures (CPMI) and other relevant international organisations and standard-setting bodies. It builds on the FSB’s Stage 1 report, setting out the challenges and the frictions in cross-border payments that contribute to them, and the CPMI’s Stage 2 report, describing the necessary elements of a response, in the form of a set of 19 building blocks.

The roadmap provides a high-level plan, which sets ambitious but achievable goals and milestones, and is designed to allow for flexibility and adaptation in the path to get there as the work progresses, while ensuring that the safeguards in terms of secure processing and legal compliance are observed. It encompasses a variety of approaches and time horizons, in order to achieve practical improvements in the shorter term while acknowledging that other initiatives will need to be implemented over longer time periods. It follows the structure of the Stage 2 report, setting out actions and indicative timelines in the following five focus areas:

  • Committing to a joint public and private sector vision to enhance cross-border payments
  • Coordinating on regulatory, supervisory and oversight frameworks
  • Improving existing payment infrastructures and arrangements to support the requirements of the cross-border payments market
  • Increasing data quality and straight-through processing by enhancing data and market practices
  • Exploring the potential role of new payment infrastructures and arrangements

The first four focus areas seek to enhance the existing payments ecosystem. The fifth is more exploratory and covers emerging payment infrastructures and arrangements. While each of the building blocks in the first four focus areas individually has the ability to bring notable benefits to cross-border payments, they have many interdependencies and the most significant enhancements are likely to be achieved if they are all implemented in a coordinated manner. The potential for new payment infrastructures and arrangements will also depend on the first four focus areas delivering change.

Strong commitment, coordination and accountability will be critical to success. The roadmap incorporates a framework where individual actions are taken forward by the most suitable expert bodies, in accordance with their mandates, with the FSB providing coordination and reporting annually on progress to the G20 and the public. This process will provide an opportunity to update and adapt the roadmap over time in order to keep it on track to meet its overall goals.

The involvement of the private sector, sharing their insights and practical expertise, as well as delivering change, will be key to support the practical implementation of the roadmap. The work under each building block will consider how to most effectively involve them. Public consultation on the individual building blocks will take place at the appropriate points, in order to ensure transparency and accountability.

Regulation, Supervision and Oversight of “Global Stablecoin” Arrangements

| PDF full text (598 KB)

Summary of document history

Summary of document history

This report sets out high-level recommendations for the regulation, supervision and oversight of “global stablecoin” (GSC) arrangements. GSC arrangements are expected to adhere to all applicable regulatory standards and to address risks to financial stability before commencing operation, and to adapt to new regulatory requirements as necessary.

So-called “stablecoins” are a specific category of crypto-assets which have the potential to enhance the efficiency of the provision of financial services, but may also generate risks to financial stability, particularly if they are adopted at a significant scale. Stablecoins are an attempt to address the high volatility of “traditional” crypto-assets by tying the stablecoin’s value to one or more other assets, such as sovereign currencies. They have the potential to bring efficiencies to payments, and to promote financial inclusion. However, a widely adopted stablecoin with a potential reach and use across multiple jurisdictions (a so-called “global stablecoin” or GSC) could become systemically important in and across one or many jurisdictions, including as a means of making payments.

The emergence of GSCs may challenge the comprehensiveness and effectiveness of existing regulatory and supervisory oversight. The FSB has agreed on 10 high-level recommendations that promote coordinated and effective regulation, supervision and oversight of GSC arrangements to address the financial stability risks posed by GSCs, both at the domestic and international level. They support responsible innovation and provide sufficient flexibility for jurisdictions to implement domestic approaches.

The recommendations call for regulation, supervision and oversight that is proportionate to the risks. Authorities agree on the need to apply supervisory and oversight capabilities and practices under the “same business, same risk, same rules” principle.

The performance of some functions of a GSC arrangement may have important impacts across borders. The recommendations also stress the value of flexible, efficient, inclusive, and multi-sectoral cross-border cooperation, coordination, and information sharing arrangements among authorities.

The FSB has agreed to the following further actions as a key building block of the roadmap to enhance cross-border payments commissioned by the G20:

  • Completion of international standard-setting work by December 2021. 
  • Establishment or, as necessary, adjustment of cooperation arrangements among authorities by December 2021 (and as needed based on market evolution).
  • At a national level, establishment or, as necessary, adjustment of regulatory, supervisory and oversight frameworks consistent with the FSB recommendations and international standards and guidance by July 2022 (and as needed based on market evolution).
  • Review of implementation and assessment of the need to refine or adapt international standards by July 2023.

FSB delivers a roadmap to enhance cross-border payments

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Ref no: 37/2020

The Financial Stability Board (FSB) today published a roadmap to enhance cross-border payments. The roadmap has been delivered to G20 Finance Ministers and Central Bank Governors for their meeting on 14 October 2020.

The G20 has made enhancing cross-border payments a priority during the Saudi Arabian Presidency. Faster, cheaper, more transparent and more inclusive cross-border payment services, including remittances, while maintaining their safety and security, would have widespread benefits for citizens and economies worldwide, supporting economic growth, international trade, global development and financial inclusion.

This report presents a roadmap to address the key challenges often faced by cross-border payments and the frictions in existing processes that contribute to these challenges. These challenges, namely high costs, low speed, limited access and insufficient transparency, affect end-users and service providers, though not all in the same way. Individuals and small companies face particular challenges with retail cross-border payments, and financial inclusion remains a challenge for many, especially in emerging market and developing economies. Low-value payments may incur high fees as a percentage of the amount sent and face cumbersome processes. The unbanked and individuals and firms from fragile states are amongst those who may not be able to access payment services at all.

This roadmap has been developed by the FSB, in coordination with the Committee on Payments and Market Infrastructures (CPMI) and other relevant international organisations and standard-setting bodies. It builds on the FSB’s Stage 1 report, setting out the challenges and the frictions in cross-border payments that contribute to them, and the CPMI’s Stage 2 report, describing the necessary elements of a response, in the form of a set of 19 building blocks.

The roadmap provides a high-level plan, which sets ambitious but achievable goals and milestones, and is designed to allow for flexibility and adaptation in the path to get there as the work progresses, while ensuring that the safeguards in terms of secure processing and legal compliance are observed. It encompasses a variety of approaches and time horizons, in order to achieve practical improvements in the shorter term while acknowledging that other initiatives will need to be implemented over longer time periods. It follows the structure of the Stage 2 report, setting out actions and indicative timelines in the following five focus areas:

  • Committing to a joint public and private sector vision to enhance cross-border payments
  • Coordinating on regulatory, supervisory and oversight frameworks
  • Improving existing payment infrastructures and arrangements to support the requirements of the cross-border payments market
  • Increasing data quality and straight-through processing by enhancing data and market practices
  • Exploring the potential role of new payment infrastructures and arrangements

The first four focus areas seek to enhance the existing payments ecosystem. The fifth is more exploratory and covers emerging payment infrastructures and arrangements. While each of the building blocks in the first four focus areas individually has the ability to bring notable benefits to cross-border payments, they have many interdependencies and the most significant enhancements are likely to be achieved if they are all implemented in a coordinated manner. The potential for new payment infrastructures and arrangements will also depend on the first four focus areas delivering change.

Strong commitment, coordination and accountability will be critical to success. The roadmap incorporates a framework where individual actions are taken forward by the most suitable expert bodies, in accordance with their mandates, with the FSB providing coordination and reporting annually on progress to the G20 and the public. This process will provide an opportunity to update and adapt the roadmap over time in order to keep it on track to meet its overall goals.

The involvement of the private sector, sharing their insights and practical expertise, as well as delivering change, will be key to support the practical implementation of the roadmap. The work under each building block will consider how to most effectively involve them. Public consultation on the individual building blocks will take place at the appropriate points, in order to ensure transparency and accountability.

Alejandro Díaz de León, Governor of the Bank of Mexico and Co-Chair of the FSB Cross-border Payments Coordination Group (CPC) that coordinated the development of the roadmap, said: “This roadmap can make a real difference in addressing the existing challenges of cross-border payments, and change will be driven by collaboration and engagement between the public and private sectors”.

Jon Cunliffe, Deputy Governor of the Bank of England, Chair of the CPMI and the other Co-Chair of the CPC and said: “The roadmap will transform cross-border payments to make them faster, cheaper, more transparent and inclusive. National authorities and international organisations are committed to delivering this roadmap to enhance cross-border payments”.

Notes to editors

The FSB also published today a report that sets out 10 high-level recommendations to promote coordinated and effective regulation, supervision and oversight of global stablecoin arrangements.

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.

Report and recommendations on regulatory, supervisory and oversight of challenges raised by “global stablecoin” arrangements: overview of public consultation

| PDF full text (178 KB)

Summary of document history

Summary of document history

On 14 April 2020, the FSB published a consultative document on Addressing the regulatory, supervisory and oversight challenges raised by “global stablecoin” arrangements. The FSB received 53 responses including those from regulated financial institutions, trade associations representing financial technology firms, financial technology firms, trade associations representing regulated financial institutions, authorities, consulting firms and non-governmental organisations

This note summarises the main points from the responses, including to the specific questions set out in the consultation and provides an overview of the response to those comments, including changes made to the recommendations.

FSB publishes high-level recommendations for regulation, supervision and oversight of “global stablecoin” arrangements

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Ref no: 38/2020

The Financial Stability Board (FSB) today published the final version of its high-level recommendations for the regulation, supervision and oversight of “global stablecoin” (GSC) arrangements following an earlier public consultation. The report states that GSC arrangements are expected to adhere to all applicable regulatory standards and to address risks to financial stability before commencing operation, and to adapt to new regulatory requirements as necessary.

So-called “stablecoins” are a specific category of crypto-assets which have the potential to enhance the efficiency of the provision of financial services, but may also generate risks to financial stability, particularly if they are adopted at a significant scale. Stablecoins are an attempt to address the high volatility of “traditional” crypto-assets by tying the stablecoin’s value to one or more other assets, such as sovereign currencies. They have the potential to bring efficiencies to payments, and to promote financial inclusion. However, a widely adopted stablecoin with a potential reach and use across multiple jurisdictions (a so-called “global stablecoin” or GSC) could become systemically important in and across one or many jurisdictions, including as a means of making payments.

The emergence of GSCs may challenge the comprehensiveness and effectiveness of existing regulatory and supervisory oversight. The FSB has agreed on 10 high-level recommendations that promote coordinated and effective regulation, supervision and oversight of GSC arrangements to address the financial stability risks posed by GSCs, both at the domestic and international level. They support responsible innovation and provide sufficient flexibility for jurisdictions to implement domestic approaches.

The recommendations call for regulation, supervision and oversight that is proportionate to the risks. Authorities agree on the need to apply supervisory and oversight capabilities and practices under the “same business, same risk, same rules” principle.

The performance of some functions of a GSC arrangement may have important impacts across borders. The recommendations also stress the value of flexible, efficient, inclusive, and multi-sectoral cross-border cooperation, coordination, and information sharing arrangements among authorities.

The FSB has agreed to the following further actions as a key building block of the roadmap to enhance cross-border payments commissioned by the G20:

  • Completion of international standard-setting work by December 2021.
  • Establishment or, as necessary, adjustment of cooperation arrangements among authorities by December 2021 (and as needed based on market evolution).
  • At a national level, establishment or, as necessary, adjustment of regulatory, supervisory and oversight frameworks consistent with the FSB recommendations and international standards and guidance by July 2022 (and as needed based on market evolution).
  • Review of implementation and assessment of the need to refine or adapt international standards by July 2023.

Notes to editors

The report is intended to primarily address risks to financial stability and therefore does not cover important issues such as money laundering or terrorist financing, data privacy, cyber security consumer and investor protection and competition, which however could have consequences for financial stability if they are not properly addressed. It therefore stresses the importance of addressing these issues as part of a comprehensive effective supervisory, regulatory and oversight framework.

The FSB also today published a roadmap to enhance cross-border payments that it has delivered to the G20. The establishment of effective regulatory, supervisory and oversight approaches for GSC arrangements will support the implementation of a key building block of the roadmap.

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.

G20 cross-border payments roadmap

On 13 October the FSB published a cross-border payments roadmap to make payments faster, cheaper, more transparent and inclusive. Jon Cunliffe, CPMI Chair and Deputy Governor of the Bank of England and Alejandro Díaz de León, Governor of Banco de México set out out concrete actions to deliver the roadmap.

BigTech firms in finance in emerging market and developing economies

12 October 2020 | PDF full text (804 KB)

This report considers market developments and financial stability implications from the provision of financial services by BigTech firms in emerging market and developing economies (EMDEs).

The report finds that the expansion of BigTech firms in financial services in EMDEs has generally been more rapid and broad-based than that in advanced economies. Lower levels of financial inclusion in EMDEs create a source of demand for BigTech firms’ services, particularly amongst low-income populations and in rural areas where populations are under-served by traditional financial institutions. The supply of financial services by BigTech firms in EMDEs has been supported by the increasing availability of mobile phones and internet access. Such technology – along with the data it generates and the flow of such data across borders – allows these firms to reach customers who were previously under-served, for example due to their lack of credit history. BigTech firms also make lending decisions based on novel sources of customer data, including from their core technology businesses.

The expansion of BigTech firms in EMDEs has had benefits but can also give rise to risks and vulnerabilities. It has also given rise to financial services that can be cheaper, more convenient, and tailored to users’ needs, thereby offering opportunities to improve consumer welfare and support financial stability. However the expansion of BigTech activity also gives rise to risks and vulnerabilities. Risks concerning consumer protection may also be larger in the case of EMDEs, particularly where customers have lower financial literacy, and when BigTech firms’ make greater use of personal data (including that acquired from their non-financial business). Where BigTech firms are the principal or even sole providers of financial services to some EMDE populations, they may be particularly prone to dominating the market for such services. They may also be subject to heightened operational risks, particularly in environments with weaker communications and financial infrastructure. Competition from BigTech firms may, in places, also reduce the profitability and resilience of incumbent financial institutions and lead to greater risk-taking.

The experience of some EMDEs demonstrates the positive role that strong regulation, supervision and other official-sector policy can play in supporting innovation in financial services and mitigating risks. Governments in some EMDEs have also driven the development of financial infrastructures and digital identity. In doing so, they have facilitated the growth of financial technology, including that employed by BigTech firms.

Risks to financial stability identified by survey respondents associated with BigTech firms’ provision of financial services: Risks rated moderate/large as a percentage of survey respondents (source: FSB survey)

Risks to financial stability identified by survey respondents associated with BigTech firms’ provision of financial services: Risks rated moderate/large as a percentage of survey respondents

The experience of EMDEs also underscores the need to apply the principle of ‘same risk – same regulation’ with respect to BigTech firms’ activities, whilst tailoring regulatory frameworks to reflect the relative size and scope of those firms’ activities. Financial authorities may also usefully contribute to the development of robust public policy and frameworks with respect to data governance, consumer protection and operational risk management.

FSB report considers financial stability implications of BigTech in finance in emerging market and developing economies

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Ref no: 35/2020

The Financial Stability Board (FSB) today published a report about market developments and financial stability implications from the provision of financial services by BigTech firms in emerging market and developing economies (EMDEs). The report is being delivered to G20 Finance Ministers and Central Bank Governors for their virtual meeting on 14 October.

The report finds that the expansion of BigTech firms in financial services in EMDEs has generally been more rapid and broad-based than that in advanced economies. Lower levels of financial inclusion in EMDEs create a source of demand for BigTech firms’ services, particularly amongst low-income populations and in rural areas where populations are under-served by traditional financial institutions. The supply of financial services by BigTech firms in EMDEs has been supported by the increasing availability of mobile phones and internet access. Such technology – along with the data it generates and the flow of such data across borders – allows these firms to reach customers who were previously under-served, for example due to their lack of credit history. BigTech firms also make lending decisions based on novel sources of customer data, including from their core technology businesses.

The expansion of BigTech firms in EMDEs has had benefits but can also give rise to risks and vulnerabilities. Use of technology has increased the efficiency with which financial services are provided. It has also given rise to financial services that can be cheaper, more convenient, and tailored to users’ needs, thereby offering opportunities to improve consumer welfare and support financial stability. However the expansion of BigTech activity also gives rise to operational and consumer protection risks and concerns about market dominance. Competition from BigTech firms may, in places, also reduce the profitability and resilience of incumbent financial institutions and lead to greater risk-taking.

The experience of some EMDEs demonstrates the positive role that strong regulation, supervision and other official-sector policy can play in supporting innovation in financial services and mitigating risks. Governments in some EMDEs have also driven the development of financial infrastructures and digital identity. In doing so, they have facilitated the growth of financial technology, including that employed by BigTech firms.

The experience of EMDEs also underscores the need to apply the principle of ‘same risk – same regulation’ with respect to BigTech firms’ activities, whilst tailoring regulatory frameworks to reflect the relative size and scope of those firms’ activities. Financial authorities may also usefully contribute to the development of robust public policy and frameworks with respect to data governance, consumer protection and operational risk management.

Notes to editors

The report published today is part of the FSB’s ongoing work to monitor market developments and assess the financial stability implications raised by FinTech. On 9 October the FSB published a report published a report on the use of supervisory (SupTech) and regulatory (RegTech) technology by FSB member authorities and regulated institutions.

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 encourages broad and timely adherence to the ISDA IBOR Fallbacks Protocol

9 October 2020

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Ref no: 34/2020

The Financial Stability Board (FSB) welcomes the announcement today by the International Swaps and Derivatives Association (ISDA) of the forthcoming launch of its IBOR Fallbacks Protocol (the Protocol) and IBOR Fallbacks Supplement (the Supplement) for IBOR-linked derivative contracts. The FSB strongly encourages widespread and early adherence to the Protocol – by all affected financial and non-financial firms – which will be a major driver of transition for derivatives in all LIBOR currencies and a critical step in benchmark transition ahead of end-2021.

LIBOR transition is a G20 priority and remains an essential task that will strengthen the global financial system. The FSB reiterates its view that firms across all jurisdictions should continue their efforts to reduce reliance on IBORs where appropriate and, in particular, remove remaining dependencies on LIBOR by the end of 2021. As part of this, market participants are encouraged to understand the fallback arrangements that would apply if a permanent discontinuation of an IBOR or other interest rate benchmark occurred, and to ensure these arrangements are robust enough to prevent potentially serious market disruption in such an event. The Protocol and ISDA fallback language will create a readily available avenue to adopt fallbacks into most derivatives contracts and replace IBOR exposures with risk-free rate linked alternatives, once fallbacks have been triggered.

The FSB’s Official Sector Steering Group (OSSG) has engaged regularly with ISDA during the significant programme of work that it has undertaken since July 2016 to strengthen the robustness of derivatives markets as part of global benchmark reforms. The fallbacks and related triggers that will be implemented via the Protocol and Supplement are based on a series of open consultations by ISDA that have resulted in broad market consensus. The FSB encourages adherence to the Protocol as a tangible step that can be taken by both financial and non-financial firms to avoid disruptions in covered  derivatives contracts if the IBOR they currently reference is discontinued or, in the case of LIBOR, becomes non-representative. Widespread adoption of the Protocol will be necessary to ensure it is effective in mitigating risks at a system-wide level. Any market participants who choose not to do so for some or all of their relevant trades will need to take robust alternative steps, such as closing out these positions or appropriate bilateral amendments, to avoid the risk of disruption.

Andrew Bailey, Governor of the Bank of England and Co-Chair of the Official Sector Steering Group, said “Finalisation of the ISDA Protocol is an important step in addressing the stock of legacy Libor-linked contracts ahead of end-2021. I would like to thank ISDA for its work on ensuring markets now have a robust and trusted fallback for trillions of dollars of derivative contracts.”

“ISDA’s  Protocol is another important milestone in the movement off of LIBOR,” said John C. Williams, New York Fed President and CEO, and Co-Chair of the Official Sector Steering Group. “It’s vitally important that firms quickly sign onto the Protocol to ensure that existing derivatives contracts are equipped with strong fallbacks.”

The FSB and OSSG Co-Chairs thank ISDA for its work to deliver this critical step in benchmark transition.

Notes to editors

The FSB set out in 2014 a series of recommendations for strengthening key interbank offered rates (IBORs) in the unsecured lending markets, and for promoting the development and adoption of alternative nearly risk-free reference rates, where appropriate. The FSB and member authorities, through the FSB Official Sector Steering Group (OSSG) chaired by Andrew Bailey (Governor, Bank of England) and John C. Williams (President and CEO, Federal Reserve Bank of New York), are working to implement and monitor these recommendations. The FSB published its most recent annual progress report in December 2019 on implementation of the recommendations.

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.