FSB reports on progress towards globally consistent and comparable climate-related disclosures

12 November 2024

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Ref: 26/2024

  • Jurisdictions have made progress implementing the International Sustainability Standards Board (ISSB) disclosures standards, strengthening interoperability with other sustainability disclosure frameworks, and developing global assurance and ethics standards for such disclosures.
  • The large majority of FSB jurisdictions have regulations, guidelines or strategic roadmaps in place for climate-related disclosures. Most FSB jurisdictions have also set or proposed disclosure requirements based on ISSB Standards and the recommendations of the Task Force on Climate-related Disclosures (TCFD).
  • Report calls for more work to address challenges with using the ISSB standards for small- and medium-sized enterprises (SMEs) and for companies in emerging market and developing economies (EMDEs).

The Financial Stability Board (FSB) published today its 2024 progress report on Achieving Consistent and Comparable Climate-Related Disclosures, drawing on a survey of FSB member jurisdictions and input from standard-setting bodies and international organisations.

Global efforts are now focused on supporting jurisdictions in adopting, applying, or otherwise being informed by the two disclosure standards issued by the ISSB in 2023. Work is underway, by the ISSB and other organisations, to provide implementation support and capacity building to address challenges faced by SMEs and by companies in EMDEs in using these standards. Significant progress has also been achieved in interoperability between the ISSB Standards and other regional and jurisdictional disclosure frameworks, as well as in connectivity with financial reporting and prudential reporting requirements.

Nineteen out of 24 FSB member jurisdictions have regulations, guidelines or strategic roadmaps in place for climate-related disclosures. Seventeen FSB jurisdictions have set or proposed voluntary or mandatory disclosure requirements based on the ISSB standards and the recommendations by the TCFD. Moreover, several jurisdictions have taken concrete steps towards introducing assurance requirements to enhance the reliability and usefulness of climate-related disclosures.

The FSB report summarises the key findings of the International Financial Reporting Standards (IFRS) Foundation’s Progress Report on Corporate Climate-related Disclosures, which has also been published today. The IFRS Foundation’s report concludes that companies’ progress in disclosing climate-related financial information using the TCFD recommendations or the ISSB Standards is encouraging, but more progress is necessary.

Notes to editors

Addressing the financial risks from climate change is a key priority of the FSB. High-quality, consistent, and comparable firm-level disclosures are essential for assessing and managing these risks and for increasing transparency at the domestic and international levels.

In July 2021, the FSB published a comprehensive Roadmap to address climate-related financial risks, outlining the key actions to be taken by standard-setting bodies and other international organisations over a multi-year period in four key policy areas: firm-level disclosures, data, vulnerabilities analysis, and regulatory and supervisory practices and tools.

Progress on firm-level disclosures of their climate-related financial risks was initially based on the recommendations developed by the TCFD. With the release of the ISSB’s inaugural sustainability-related disclosure standards in 2023, the TCFD has been disbanded. The FSB continues to monitor work to strengthen the relevance, reliability and comparability of climate-related financial disclosures through its progress report on climate-related disclosures. Following an FSB request in October 2023, the monitoring of progress on companies’ climate-related disclosures has been taken over by the IFRS Foundation.

The report released today by the FSB includes input from its member jurisdictions and the following standard-setting bodies: International Sustainability Standards Board (ISSB), International Organization of Securities Commissions (IOSCO), International Auditing and Assurance Standards Board (IAASB), International Ethics Standards Board for Accountants (IESBA), Basel Committee on Banking Supervision (BCBS) and International Association of Insurance Supervisors (IAIS).

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.

Achieving Consistent and Comparable Climate-related Disclosures: 2024 Progress report

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Significant progress has been achieved since 2021 in setting internationally consistent and decision-useful climate-related financial disclosure standards, adoption or consideration of these standards across the globe, as well as in establishing international assurance and ethics standards to enhance the reliability of climate- and other sustainability-related disclosures.

This report describes progress made over the past year by FSB member jurisdictions, standard-setters and international organisations towards achieving globally consistent and comparable climate-related disclosures.

Following the publication of the International Sustainability Standards Board (ISSB)’s inaugural sustainability disclosure standards in 2023, the ISSB, standard-setting bodies and international organisations have focussed on providing support – including capacity-building – to jurisdictions and firms for using these standards. Great strides have been made in improving interoperability between the ISSB Standards and other sustainability disclosure frameworks and in establishing a global assurance and ethics framework to ensure sustainability disclosures are reliable and thus decision-useful. Work has also advanced on transition plans, as well as on enhancing the linkage of sustainability-related disclosures with financial reporting and prudential reporting requirements.

Out of 24 FSB member jurisdictions surveyed, 19 reported they have already enacted regulations, issued guidelines or developed strategic roadmaps for climate-related disclosures. Seventeen FSB jurisdictions have set or proposed voluntary or mandatory disclosure requirements based on the ISSB Standards and the recommendations of the Task Force on Climate-related Disclosures (TCFD). Moreover, several jurisdictions have taken concrete steps towards assurance requirements.

This report also summarises the key findings of the International Financial Reporting Standards (IFRS) Foundation’s Progress Report on Corporate Climate-related Disclosures. The IFRS Foundation report concludes that firms have made encouraging progress in disclosing climate-related financial information using the TCFD recommendations or the ISSB Standards, but that more progress is necessary.

FSB MENA Group discusses artificial intelligence, cyber risk and operational readiness

6 November 2024

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Ref: 25/2024

The Financial Stability Board (FSB) Regional Consultative Group for the Middle East and North Africa (RCG MENA) met today in Saudi Arabia. The meeting was hosted by the Saudi Central Bank (SAMA), at its headquarters in Riyadh.

Technological innovation featured prominently on the agenda. Participants took stock of the advances relating to artificial intelligence (AI) in the financial sector and exchanged experiences on how AI is being applied by both supervisors and financial institutions. While the use of AI can generate efficiencies and create value, it also introduces new risks. In this regard, participants look forward to the FSB’s forthcoming report on the financial stability implications of AI. Eddie Yue, co-chair of the RCG for Asia and Chief Executive of the Hong Kong Monetary Authority, attended this meeting to bring in the perspectives of the Asia region, drawn from the RCG Asia workshop in October on the financial stability implications of AI, tokenisation and crypto-assets.

The pervasive role of technology in the financial system has also contributed to the increased frequency and elevated severity of operational and cyber incidents. Recognising that these risks to operational resilience can also arise from reliance on external providers, members discussed their approaches to third-party risk management and cyber incident reporting. They welcomed the FSB’s public consultation on a Format for Incident Reporting Exchange (FIRE) and its potential to address challenges arising from the need for financial institutions to report operational incidents to multiple authorities. Together, FIRE and the FSB’s toolkit for enhancing third-party risk management and oversight can reduce fragmentation, facilitate communications and coordination within and across jurisdictions, and ultimately enhance operational resilience and incident response.

Members exchanged views on global and regional market developments, including perspectives on the financial stability outlook. Topics addressed included the management of the gradual easing in inflation expectations and the role of technology and social media in influencing depositor behaviour.

Finally, members received an update on the FSB’s work programme and expressed their views on the proposed areas of focus for 2025, bringing their regional perspective to the discussion.

Notes to editors

The FSB RCG for the Middle East and North Africa is co-chaired by Governor Ayman Al-Sayari, Saudi Central Bank, and Governor Hassan Abdalla, Central Bank of Egypt. Membership includes financial authorities from Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Morocco, Oman, Qatar, Saudi Arabia, Tunisia, Türkiye and the United Arab Emirates.

The FSB has six Regional Consultative Groups, established under the FSB Charter, to bring together financial authorities from FSB member and non-member countries to exchange views on vulnerabilities affecting financial systems and on initiatives to promote financial stability.1 Typically, each Regional Consultative Group meets twice each year.

The FSB coordinates at the international level the work of national financial authorities and international standard-setting bodies and develops and promotes the implementation of effective regulatory, supervisory, and other financial sector policies in the interest of financial stability. It brings together national authorities responsible for financial stability in 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.

  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 analyses interest rate and liquidity risks and the role of technology and social media on depositor behaviour

23 October 2024

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Ref: 24/2024

  • FSB analysis finds life insurers, non-bank real estate investors, and a weak tail of banks to be most vulnerable to the confluence of solvency and liquidity risks.
  • Technological developments and social media could accelerate future bank runs, with implications for liquidity risk management practices and supervision.
  • Report calls on bank managers and financial sector authorities to address the liquidity and solvency vulnerabilities that give rise to extreme deposit outflows and to be able to react much more quickly to deposit outflows than in the past.

The Financial Stability Board (FSB) published today a report on depositor behaviour and interest rate and liquidity risks in the financial system, drawing on lessons from the March 2023 banking turmoil.

This report summarises the main findings from FSB work over the past year to assess vulnerabilities in the global financial system related to solvency and liquidity risks amid rising interest rates, the influence of technology and social media on depositor behaviour during bank runs, and how the use of technologies may affect the planning and execution of a resolution.

The analysis identifies life insurers, non-bank real estate investors – comprising real estate investment trusts, real estate funds, and other nonbank mortgage lenders –  as well as a weak tail of banks as most vulnerable to solvency and liquidity risks at the current juncture. These entity types typically have a high proportion of interest rate-sensitive assets and liabilities and are affected by higher rates through various solvency and liquidity risk channels.

Some of the deposit runs that took place in March 2023 unfolded at an unprecedented speed. The three fastest deposit runs had outflows of around 20-30% per day, which was faster than the highest peak one-day outflow of past deposit runs reported by FSB members. The scale of deposit runs, as a share of pre-run deposits, was in the upper range of outflows seen in past runs. Banks experiencing the runs tended to have an unusually high reliance on uninsured deposits, while the concentration of the deposit base likely played a role in the large outflows.

There is some evidence that social media had an influence on some of the recent bank runs, though the depositor categories at the centre of those runs are likely to have had access to other information sources. Technological advancements have facilitated an easier and faster transfer of deposits in recent years, which may have made depositors more willing to move funds between banks.

The findings in the report raise issues that are relevant for bank managers, supervisors, regulators, resolution authorities and policy makers. The speed of the recent runs means that banks and authorities may need to be able to react much more quickly to deposit outflows than in the past; find ways to address the liquidity and solvency vulnerabilities that gave rise to such extreme outflows; and consider whether monitoring of social media could be helpful as an early warning tool to flag potential stress at a bank or wider turmoil that might affect banks. Consideration could also be given to collecting and publishing additional information on bank deposits and on unrealised losses on bank securities portfolios to fill identified data gaps.

The possibility of further rapid deposit runs in the future also raises challenges for authorities’ ability to execute a resolution. Authorities and banks should enhance their operational readiness for resolution and incorporate effective communication strategies to ensure coordinated and consistent messaging.

Notes to editors

The FSB provided an overview of the March 2023 banking turmoil and follow-up work in its October 2023 Annual Report on Promoting Global Financial Stability. It also issued a report in October 2023 on preliminary lessons learnt for resolution from the 2023 bank failures.

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.

Depositor Behaviour and Interest Rate and Liquidity Risks in the Financial System: Lessons from the March 2023 banking turmoil

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Over 2022 and 2023, interest rates rose significantly in a number of advanced economies, following a decade where rates had remained at historically low levels. Rate increases were higher and faster than generally expected, resulting in significant valuation losses and sometimes precipitous increases in funding costs or liquidity risks. A number of bank deposit runs took place in the period following these interest rate rises, which represented the most serious disruption to the banking sector in more than a decade.
This report summarises the main findings from FSB work over the past year to:

  • assess vulnerabilities in the global financial system from the intersection of solvency and liquidity risks in an environment of higher interest rates;
  • investigate the deposit runs, including the role of technology, social media and interest rates on depositor behaviour; and
  • assess how the use of technologies may affect banks’ and authorities’ planning and execution of a resolution.

The report finds that the three entity types most vulnerable to a combination of solvency and liquidity risks at the current juncture are: (i) a weak tail of banks, (ii) life insurers, and (iii) non-bank real estate investors. The report also finds that technological advancements have facilitated an easier and faster transfer of deposits in recent years and that there is some evidence that social media had an influence on some of the recent bank runs.

The findings in this report raise issues that are relevant for bank managers, supervisors, regulators, resolution authorities and policy makers. The report concludes with policy implications.

Strengthening Financial Resilience: Lessons from Pittsburgh

22 October 2024

Speech by FSB Chair, Klaas Knot at the Bloomberg Global Regulatory Forum, New York, 22 October 2024

The views expressed in these remarks are those of the speaker in his role as FSB Secretary General and do not necessarily reflect those of the FSB or its members.

Good morning everyone.

It could have been right here in New York City. That would have been fitting, as this city was, and still is, the center of gravity for global finance.

But, as it happened, the US administration made a last-minute decision to pick Pittsburgh as the venue for the G20 summit.

We are back in the fall of 2009. Less than a year earlier, when G20 leaders first met in Washington DC, the world economy had been facing its greatest crisis in generations. At the Pittsburgh Summit, the memory of the crisis was still fresh.

The fall of Lehman. The rescue of AIG. The race against the clock to prevent a total meltdown of the financial system.

Leaders from the 20 largest nations in the world had all gone through those fateful crisis days. They shared a conviction that this should not happen again. Ever.

They decided on a massive strengthening of regulation to address the weaknesses in the global financial system and to curb excessive risk taking. And they endorsed the mandate of the newly established Financial Stability Board to coordinate and monitor progress.

Pittsburgh turned the tide. The rest is history. But it is an unfinished history.

For sure, the reforms that were agreed in Pittsburgh did substantially strengthen the global financial system. In recent years, markets have experienced several episodes of turmoil, and we have seen potentially destabilising failures of banks and non-banks. But the core of the system has held up relatively well.

So, one interpretation is that the financial system has proved to be resilient. But that is not entirely true.

Take March 2020 for example. This turmoil was contained both through improved resilience and unprecedented policy actions. Without the combined force of these policy actions, the reforms implemented since 2009 may have not been sufficient to stave off another financial crisis.

And it’s not only in 2020 that unprecedented policy actions were needed. In 2023 the fire brigade had to turn out again.

So, we’ve made progress, but there is much left to do if we want a truly resilient financial system. One that can finance the economy through thick and thin without recourse to extraordinary support. Furthermore, the financial system is evolving, and so must our regulations. Can we keep up the pace? Allow me to share some concerns about that.

First of all, our work to make the banking sector more resilient is not yet complete. For one thing, the final Basel III standards still need to be implemented in many jurisdictions. In the meantime, the banking turmoil in March last year was a reminder that bank runs are not a thing of the past. The demise of Silicon Valley Bank and Credit Suisse not only brought lessons for banks and supervisors. They also highlighted that 13 years after the FSB issued its Key Attributes for Effective Resolution Regimes, authorities still face challenges in dealing with failing banks.

Next to the unfinished agenda in banking, the non-bank financial sector continues to face serious vulnerabilities. Partly as a response to strengthening banking regulation, non-bank financial institutions are playing a larger role in financing the real economy, now accounting for nearly half of total global financial assets.

And as we have seen over the past few years, structural vulnerabilities in the sector have the potential to cause systemic risk. These include liquidity mismatches, leverage, and inadequate margin preparedness. The FSB, working with other standard setters, has done a great deal of work on this issue. We have issued policy recommendations in several key areas.

Drawing up these policy recommendations, however, is not enough to stem systemic risk in NBFI. For that to happen, we must implement them. That means authorities must not only put them into national laws and regulations, they must also have the capacity to operationalize them.

Third, technological innovation continues to shape the way the financial sector functions, and it adds another layer of complexity. Technology can create new interdependencies, for example when many financial institutions rely on the same service providers. It can also increase the speed at which a crisis unfolds.

And technology raises important questions about the regulatory perimeter. Above all technology related risks can exacerbate pre-existing vulnerabilities in the financial system and may create new ones.

Take crypto-assets. This fast-growing market has seen more than its fair share of bankruptcies, liquidity crises and outright fraud, even as its links with traditional finance continue to grow. The FSB has issued recommendations to regulate the market for crypto-assets.

The G20 has endorsed these recommendations and, again, they now need to be implemented globally. As you might notice, I’m talking a lot about implementation, because that’s where my concern lies. It seems that, 16 years after Lehman, implementation fatigue has started to set in. Political commitment for maintaining financial stability is usually the highest when the collective memory of the last crisis is still fresh. When this memory starts to fade, there is the risk that financial stability is taken for granted.

Something that can be left to the bureaucrats, to the technicians. Not least because there are so many other policy priorities to deal with for governments. But that would be a mistake.

We do need the involvement of politicians, of lawmakers, because without them, it becomes even harder to implement necessary regulations. After all, financial stability is the foundation for almost all public policy. If financial stability is gone, as a government you can forget about the other policy priorities. You will spend most of your time drawing up rescue plans for an economy in free fall.

So we should not wait for the next crisis. We also need commitment in good times, when the work to develop and implement policy needs to get done. This commitment is even more important in a world that is getting more fragmented, both politically and economically.

I am concerned about our capacity to work together on cross-border challenges in such a world.

During the Global Financial Crisis, policymakers around the globe were able to respond swiftly and effectively. In a fragmented world, such a swift response could become more complicated. This could prove costly because the most important challenges to financial stability are precisely the cross-border issues that we can only solve if we work together.

And to the financial industry I would say: rules that strengthen the resilience of the financial system are in your best interest too. Some in the industry view regulation as a constraint, something that limits profitability and imposes undue costs. But it’s just the other way around.

Financial regulation is not an obstacle, it is an enabler of sustainable, long-term growth. Globally implemented regulation strengthens international financial stability, levels the playing field, and, in turn, enhances the confidence of your shareholders, clients, and counterparties. Strong regulation is not a constraint on the financial industry, it is an asset.

15 years after Pittsburgh, strengthening the financial system is an unfinished history. Partly that comes with the job. The financial system is always evolving, so our policy also needs to evolve.

But, that’s not the only reason. It is also important that authorities finish implementing the measures we’ve all agreed are needed to address existing vulnerabilities. Vulnerabilities that could lead to the next crisis, if they are allowed to persist.

This calls for maintaining our ambition as policy makers, and for law makers to take the agreed policies all the way through to implementation. I wish for us to have the determination and collaborative spirit that the leaders in Pittsburgh collectively felt.

Let’s work together to finish what we started. Let’s stay sharp, focused and committed to preserving financial stability.

And where better to express that commitment than in the city that never sleeps.

FSB Chair sets out the FSB’s work to maintain financial stability amidst technological advancements

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Ref: 23/2024

  • FSB Chair calls for continued momentum in addressing longstanding financial system vulnerabilities related to elevated debt levels and asset valuations, non-bank liquidity and leverage, and asset and funding market interlinkages.
  • Accompanying report on tokenisation finds low adoption in the financial sector to date, but warns that financial stability risks could rise if tokenisation scales up significantly and if identified vulnerabilities are not adequately addressed.
  • Jurisdictions have made progress in implementing the policy and regulatory responses to address the risks of crypto-assets, developed by the IMF, FSB, and standard-setting bodies (SSBs), but challenges remain.

The Financial Stability Board (FSB) today published a letter from its Chair, Klaas Knot, to G20 Finance Ministers and Central Bank Governors, ahead of their meeting on 23-24 October.

Fears over the global economic outlook are easing, with a number of central banks cutting interest rates. The letter warns of vulnerabilities associated with high debt levels and asset prices, the interaction of non-bank liquidity and leverage, and the connections between different asset and funding markets, illustrated by the short-lived market volatility in August.

The letter outlines the work the FSB has undertaken on financial innovation, payments systems, and cyber and operational resilience. It also introduces the reports the FSB is submitting to the G20 addressing these issues, including:

  • The financial stability implications of tokenisation. Tokenisation of assets may have the potential to improve efficiencies and provide access to new markets for investors, but it can also amplify many of the vulnerabilities seen in traditional finance. The FSB report focuses on tokenisation based on distributed ledger technology (DLT), which is the technology used in most tokenisation initiatives. The limited publicly available data on tokenisation suggests that its adoption is still very low but appears to be growing. As such, tokenisation could have implications for financial stability if it scales up significantly, is used to create complex and opaque automated trading products, or if identified vulnerabilities are not adequately addressed through oversight, regulation, supervision, and enforcement. The report sets out some considerations for authorities and international bodies, including ways to address data and information gaps and to increase understanding of how tokenisation and its related features fit into legal and regulatory frameworks and supervisory approaches.
  • The status report on the G20 Crypto-Asset Policy Implementation Roadmap. Jurisdictions have made progress implementing the policy and regulatory responses to crypto-assets developed by the IMF, FSB, and standard-setting bodies (SSBs). The report flags some implementation challenges related to the lack of comprehensive regulation of crypto-asset issuers and service providers; cross-border issues, particularly with respect to offshore jurisdictions; and the lack of specific stablecoin regulatory requirements. The report calls on authorities to advance the implementation of the FSB’s crypto-asset framework, globally. It warns that the prevalence of non-compliance with existing laws and regulations significantly undermines these efforts to implement the FSB framework. Additionally, if risks from cross-border crypto-asset activities in offshore jurisdictions increase, international organisations, SSBs and jurisdictional authorities may need to consider additional tools to promote implementation beyond G20 members.

Other reports being delivered to the G20 meeting include a consultation on a common Format for Incident Reporting Exchange (FIRE); progress reports on the G20 Cross-Border Payments Roadmap and associated indicators, which capture key aspects of the user experience; and a report on depositor behaviour and interest rate and liquidity risks in the financial system, drawing on lessons from the March 2023 banking turmoil.

The letter underlines the critical importance of effective and timely implementation of agreed policies and standards in the interest of global financial stability.

Notes to editors

The FSB report defines “tokenisation” as a process that involves utilising new technologies, such as distributed ledger technology, to issue or represent assets in digital forms known as tokens. The report focuses on tokenisation involving financial assets.

In September 2023, the G20 Leaders endorsed the Crypto-Asset Policy Implementation Roadmap, which is included in the IMF-FSB Synthesis Paper: Policies for Crypto-Assets and lays out both planned and ongoing initiatives by the IMF, the FSB, and relevant SSBs.

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 Chair’s letter to G20 Finance Ministers and Central Bank Governors: October 2024

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The FSB is committed to developing a robust framework to harness the opportunities from digitalisation while mitigating associated risks, to support Brazil’s G20 Presidency goal of building a just world and sustainable planet.

This letter from the FSB Chair, Klaas Knot, to G20 Finance Ministers and Central Bank Governors ahead of their meeting on 23-24 October focuses the FSB’s work to harness the benefits and respond to the challenges of technological innovation. The letter covers:

Depositor behaviour and interest rate and liquidity risks in the financial system

The March 2023 banking turmoil illustrated the role that technological advancements can play in accelerating the propagation of shocks. The letter covers the FSB’s analysis on the role of technology, social media, and interest rates on depositor behaviour and deposit ‘stickiness’. The report will be submitted to the G20 ahead of this meeting.

Cyber and operational resilience

Cyber and operational risks to financial stability were illustrated by the CrowdStrike outage and by operational disruptions in high-value messaging and payments systems in July. To facilitate efficient and effective response and recovery from operational this, the FSB is delivering, for public consultation, a common Format for Incident Reporting Exchange (FIRE).

Crypto-assets

The FSB’s status report outlines the progress made by jurisdictions in implementing the global regulatory framework for crypto-asset policy and regulatory responses developed by the IMF, FSB and standard-setting bodies.

Tokenisation

The FSB’s report on the financial stability implications of tokenisation outlines steps that authorities and international bodies should consider to address data gaps in monitoring tokenisation adoption; increase understanding of how its features fit into legal and regulatory frameworks and supervisory approaches; and facilitate cross-border information sharing.

The Financial Stability Implications of Tokenisation

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Tokenisation has the potential to offer benefits to the financial system, such as increased efficiency and transparency, but it may also have financial stability implications.

This report is focused on a subset of tokenisation initiatives – tokenisation based on distributed ledger technology (DLT) as the underlying technology platform – assessed to be the most relevant for financial stability based on recent market developments. In particular, the report focuses on the tokenisation of financial assets, such as tokenised money that may potentially be used as a settlement asset for payments and other financial assets. It does not examine tokenisation initiatives involving central bank digital currencies (CBDCs) or crypto-assets.

The report analyses recent developments in DLT-based tokenisation, including the potential uses of tokenised assets and their interaction with the traditional financial system.

The limited publicly available data on tokenisation suggest that its adoption is very low but appears to be growing. Owing to its small scale, tokenisation does not, therefore, currently pose a material risk to financial stability. Nevertheless, the report identifies several financial stability vulnerabilities associated with DLT-based tokenisation, which relate to liquidity and maturity mismatch; leverage; asset price and quality; interconnectedness; and operational fragilities. Tokenisation could have implications for financial stability if the tokenised part of the financial system scales up significantly, if increased complexity and opacity of tokenisation projects lead to unpredictable outcomes in times of stress, and if identified vulnerabilities are not adequately addressed through oversight, regulation, supervision, and enforcement.

The report reviews the financial stability implications of these identified vulnerabilities and sets out considerations for the FSB and relevant standard-setting bodies.

G20 Crypto-asset Policy Implementation Roadmap: Status report

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Promoting, supporting, and monitoring the effective implementation of a coordinated and comprehensive policy and regulatory response to address the risks of crypto-assets is a priority of the G20.

This status report reflects the progress made in taking forward the IMF-FSB crypto-asset policy implementation roadmap.

Jurisdictions have made progress in implementing the policy and regulatory responses developed by the IMF, FSB, and standard-setting bodies (SSBs). Nearly all FSB member jurisdictions have plans in place to develop new or revise their existing regulatory frameworks for crypto-assets and stablecoins, or they already have those frameworks in place. To raise awareness of their policy frameworks and support implementation beyond the G20, the IMF, FSB, SSBs and the Financial Action Task Force have organised workshops, outreach sessions, knowledge sharing events, and capacity building programmes.

Nevertheless, despite the progress, challenges remain. Inconsistent implementation of the FSB Framework may hinder its effectiveness and lead to regulatory arbitrage. Cross-border crypto-asset activities that originate from offshore jurisdictions present elevated regulatory and supervisory challenges for authorities. The prevalence of non-compliance with applicable laws and regulations significantly undermines efforts to implement the FSB Framework and other international standards on crypto-assets. Stablecoins should be subject to specific regulatory requirements due to their vulnerability to a sudden loss in confidence and to potential runs on the issuer or underlying reserve assets.

The IMF and FSB, together with the SSBs and other international organisations, will continue to support and promote a globally coordinated and comprehensive policy and regulatory approach to crypto-asset markets. The FSB will conduct a review of the status of implementation of the FSB Framework by end-2025.