Financial Stability Board survey on implementation reports

25 February 2020

A key task of the Financial Stability Board (FSB) is to report on progress by FSB member jurisdictions in implementing the G20 post-crisis financial regulatory reforms. To do so, the FSB monitors implementation and publishes various types of progress reports and peer review reports.

The FSB is interested in learning which implementation reports readers find most useful and what we can do to improve their content. Please take 3 minutes of your time to complete this survey.  Survey responses are anonymous. The survey closes at 17:00 CET on Thursday 5 March.

Thank you for your time.

FSB Chair sets out focus for Saudi Arabian G20 Presidency

19 February 2020

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Ref no: 3/2020

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 meetings in Riyadh later this week.

The letter notes that the global financial system is constantly facing new challenges. Technology is changing the nature of traditional finance; the non-bank sector has grown and requires deeper understanding and coordination among the supervisory and regulatory community. Pressures that can lead to market fragmentation exist. Concurrently, important supervisory and regulatory issues require attention. 

Against this backdrop, focus areas for the FSB’s work for the Saudi Arabian G20 include:

  • LIBOR transition. LIBOR is facing cessation in less than two years, but the official and private sectors have much to accomplish to ensure a smooth transition to a post-LIBOR world. The FSB welcomes the increased G20 focus on the issue of LIBOR transition and will publish reports on this transition in July and December.

  • Technology. Building on work published last year, the FSB will provide a report on the implications of the provision of financial services by large technology firms (BigTechs) for emerging market and developing economies. The G20 Presidency has also asked the FSB to submit a report on the range of practices in the use of technology in regulation (‘RegTech’) and supervision (‘SupTech’).

  • So-called ‘stablecoins’. The FSB is resolved to quicken the pace of developing the necessary regulatory and supervisory responses to these new instruments. It will issue a draft report on regulatory issues and possible responses for public consultation in April.

  • Cross-border payments. Recognising the importance of efficient and inclusive payment services for global growth, the Saudi G20 Presidency has requested the FSB to coordinate the development of a roadmap for improving cross-border payments. The FSB will deliver this roadmap to the G20 in October.

  • Non-bank financial intermediation (NBFI). NBFI now accounts for roughly half of global financial assets. As this sector grows and evolves, there may be new vulnerabilities that need assessment. The FSB is considering what work is appropriate and whether to reorganize existing work on NBFI.

  • Evaluating the post-crisis regulatory framework. The FSB is continuing to evaluate whether the post-crisis financial regulatory reforms are working as intended. In June it will publicly consult on an evaluation to assess the extent to which too-big-to-fail reforms are reducing the systemic and moral hazard risks associated with systemically important banks. The FSB will also continue its work to address unintended, negative effects of fragmentation started under the previous G20 presidency.

  • Implementation monitoring. Finalising post-crisis reforms and monitoring their effective implementation remains a priority. Much of the new financial regulatory framework called for by the G20 is largely in place, but implementation is not complete. The FSB will deliver its annual report on progress in implementation ahead of the G20 Summit.

Notes to editors

The FSB’s 2020 work programme was published in December. 

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, Governor and Vice Chairman for Supervision, 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 Chair’s letter to G20 Finance Ministers and Central Bank Governors: February 2020

| PDF full text (240 KB)

This letter was sent by the FSB’s Chair, Chair Randal K. Quarles, to G20 Finance Ministers and Central Bank Governors ahead of their meetings in Riyadh from 22-23 February.

The letter notes that the global financial system is constantly facing new challenges. Technology is changing the nature of traditional finance; the non-bank sector has grown and requires deeper understanding and coordination among the supervisory and regulatory community. Pressures that can lead to market fragmentation exist. Concurrently, important supervisory and regulatory issues require attention. 

Against this backdrop, focus areas for the FSB’s work for the Saudi Arabian G20 include:

  • LIBOR transition. LIBOR is facing cessation in less than two years, but the official and private sectors have much to accomplish to ensure a smooth transition to a post-LIBOR world. The FSB welcomes the increased G20 focus on the issue of LIBOR transition and will publish reports on this transition in July and December.

  • Technology. Building on work published last year, the FSB will provide a report on the implications of the provision of financial services by large technology firms (BigTechs) for emerging market and developing economies. The G20 Presidency has also asked the FSB to submit a report on the range of practices in the use of technology in regulation (‘RegTech’) and supervision (‘SupTech’).

  • So-called ‘stablecoins’. The FSB is resolved to quicken the pace of developing the necessary regulatory and supervisory responses to these new instruments. It will issue a draft report on regulatory issues and possible responses for public consultation in April.

  • Cross-border payments. Recognising the importance of efficient and inclusive payment services for global growth, the Saudi G20 Presidency has requested the FSB to coordinate the development of a roadmap for improving cross-border payments. The FSB will deliver this roadmap to the G20 in October.

  • Non-bank financial intermediation (NBFI). NBFI now accounts for roughly half of global financial assets. As this sector grows and evolves, there may be new vulnerabilities that need assessment. The FSB is considering what work is appropriate and whether to reorganize existing work on NBFI.

  • Evaluating the post-crisis regulatory framework. The FSB is continuing to evaluate whether the post-crisis financial regulatory reforms are working as intended. In June it will publicly consult on an evaluation to assess the extent to which too-big-to-fail reforms are reducing the systemic and moral hazard risks associated with systemically important banks. The FSB will also continue its work to address unintended, negative effects of fragmentation started under the previous G20 presidency.

  • Implementation monitoring. Finalising post-crisis reforms and monitoring their effective implementation remains a priority. Much of the new financial regulatory framework called for by the G20 is largely in place, but implementation is not complete. The FSB will deliver its annual report on progress in implementation ahead of the G20 Summit.

Call for papers: 2020 Annual Meeting of the Central Bank Research Association (CEBRA)

12 February 2020

The FSB invites academic paper submissions for a session on the topic of ‘Evaluating the Effects of Too-Big-To-Fail Reforms’ at the 2020 Annual Meeting of CEBRA. The conference is jointly organised with the Centre For Macroeconomics at The London School of Economics and Political Science (LSE) and the Bank of England, and in association with the Leibniz Institute for Financial Research (SAFE). It will take place in London on 1-3 September 2020.

The FSB is conducting post-implementation evaluations of the effects of G20 financial regulatory reforms based on its evaluation framework. The framework guides analyses of whether the reforms are achieving their intended outcomes, and helps identify any material unintended consequences that may have to be addressed, without compromising on the objectives of the reforms.

The FSB is currently evaluating the effects of too-big-to-fail (TBTF) reforms for systemically important banks (SIBs). These reforms, agreed by the G20 in the aftermath of the global financial crisis, comprise higher loss-absorbency requirements; more intensive supervision; and policies to put in place effective resolution regimes and resolution planning to improve the resolvability of those banks’ structures and operations. The evaluation is assessing whether the implemented reforms are reducing the systemic and moral hazard risks associated with SIBs. It is also examining the broader effects of these reforms on the functioning of the financial system and the economy.

Authors are invited to submit papers that examine the effects of TBTF reforms for SIBs. In particular, papers would cover one or more of the following areas:

  1. To what extent are TBTF reforms achieving their objectives? Are they reducing the systemic and moral hazard risks associated with SIBs? Are they enhancing the ability of authorities to resolve systemic banks in an orderly manner and without exposing taxpayers to loss, while maintaining continuity of their critical economic functions?

  2. Do the effects of these reforms differ by type of bank (e.g. global vs domestic SIBs) or jurisdiction? If so, what might explain these differences?

  3. What have been the broader effects of these reforms on the resilience and structure of the financial system, the functioning of financial markets, global financial integration, or the cost and availability of financing?

Papers should be submitted via the SAFE website by Tuesday 3 March 2020.

The Value of the LEI for Identification in Digital Processes

4 February 2020

FSB takes steps to enhance the effectiveness of its Regional Consultative Groups

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Ref no: 2/2020

The Financial Stability Board (FSB), as part of its work to reinforce engagement with stakeholders, has completed a review of how to enhance the effectiveness of its six Regional Consultative Groups (RCGs) as an outreach and feedback mechanism. Through the RCGs, the FSB engages with approximately 70 jurisdictions beyond its membership. Typically, each RCG meets twice a year to exchange views on the vulnerabilities affecting financial systems and on the FSB’s ongoing and planned initiatives to promote financial stability.

The review was conducted by a working group comprised of FSB and non-FSB members from each of the six RCGs, and was co-chaired by Carolyn Wilkins, Senior Deputy Governor of the Bank of Canada and Moses Pelaelo, Governor of the Bank of Botswana.

The review found that both FSB and non-FSB members value the RCGs as an important mechanism to exchange views on a wide range of financial stability issues and the implications for their region. While other types of regional groups exist, few bring together the prudential authorities, market regulators and finance ministries to discuss topics of common interest in the way that RCGs do.

The FSB and RCGs agreed a set of actions to encourage greater input from non-FSB member authorities into the FSB’s work and to further strengthen the effectiveness of RCG meetings. These actions include: involving RCG members in the FSB’s work at an early stage, for instance through their participation in FSB working groups, surveys and workshops; facilitating RCG Co-Chairs’ ability to contribute to FSB Plenary discussions by providing perspectives on regional vulnerabilities, implementation of relevant supervisory and regulatory FSB policies and any impact of such reforms on their region; and further enhancing the focus in RCG meetings on matters of regional and cross-sectoral interest.

In addition, the FSB agreed to continue to hold its Emerging Market and Developing Economies (EMDEs) Forum (which was last held in 2017) on an annual basis as part of FSB Plenary meetings. The EMDEs Forum focuses on issues of particular interest to emerging markets and developing economies and of common interest across RCGs. On a pilot basis, the FSB will also organise a conference to which all FSB and RCG members are invited, and for which FSB and RCG members would be asked to propose topics for the agenda.

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.

In 2011, the FSB established six RCGs, one each for the Americas, Asia, Commonwealth of Independent States, Europe, Middle East and North Africa, and Sub-Saharan Africa region, to expand upon and formalise the FSB’s outreach activities.

The FSB is chaired by Randal K. Quarles, Governor and Vice Chairman for Supervision, 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.

Correspondence with ISDA on pre-cessation triggers

30 January 2020 | PDF full text (99 KB)

In November 2019 the Co-Chairs of the FSB’s Official Sector Steering Group (OSSG) wrote to the International Swaps and Derivatives Association (ISDA) to encourage it to add a “pre-cessation” trigger alongside the cessation trigger as standard language in the definitions for new derivatives and in a single protocol without embedded optionality, for outstanding derivative contracts referencing key Interbank Offered Rates (IBORs). This would help to reduce systemic risk and market fragmentation by ensuring that as much of the swaps market as possible falls back to alternative rates in a coordinated fashion.

In December 2019 ISDA responded to the letter from the OSSG Co-Chairs. ISDA asked, amongst other things, for a statement from the UK’s Financial Conduct Authority (FCA) and the ICE Benchmark Administration that the “reasonable period” during which a “non-representative” LIBOR would be published would be minimal (i.e., a number of months not years) after the FCA announces that LIBOR is no longer representative. This letter sets out the FCA’s response to describe the laws relevant to this situation and provide clarity on how the FCA intends to apply them. ISDA also received a response to its letter from ICE Benchmark Administration and the London Clearing House has announced a rulebook consultation process regarding the inclusion of an automatic trigger.

In December 2019 the FSB published its annual progress report on implementation of recommendations to reform major interest rate benchmarks. The report emphasises that the continued reliance of global financial markets on LIBOR poses risks to financial stability and it calls for significant and sustained efforts by the official sector and by financial and non-financial firms across many jurisdictions to transition away from LIBOR before end-2021.

Global Monitoring Report on Non-Bank Financial Intermediation 2019

19 January 2020 | PDF full text (931 KB)

The Global Monitoring Report on Non-Bank Financial Intermediation 2019 presents the results of the FSB’s annual monitoring exercise to assess global trends and risks from non-bank financial intermediation (NBFI).

FSB NBFI Report 2019 - Exhibit 0-1

The annual monitoring exercise is part of the FSB’s strategy to enhance the resilience of NBFI. The exercise compares the size and trends of financial sectors in aggregate and across jurisdictions. The FSB focuses particularly on those parts of NBFI that may pose bank-like financial stability risks and/or regulatory arbitrage.

Section 1 introduces the FSB’s monitoring approach, including the scope, data, and terminology. It also describes recent innovations in NBFI. The 2019 report covers data up to end-2018 from 29 jurisdictions, which together represent over 80% of global GDP.

Section 2 provides an overview of the size and growth of all sectors in the financial system. Total global financial assets grew by 1.4% in 2018, driven largely by banks. Within MUNFI (Monitoring Universe of Non-Bank Financial Intermediation) assets of insurance corporations and pension funds remained largely unchanged, while those of OFIs (Other Financial Intermediaries) declined marginally as a result of stock market declines in late 2018 and, to a lesser extent, outflows from some of these entities.

NBFI as a share of total financial assets

In 2018, lending assets of OFIs, which comprise all financial institutions that are not central banks, banks, insurance corporations, pension funds, public financial institutions or financial auxiliaries grew by 3.0%, largely driven by the euro area. In comparison, bank loans grew by 5.9%. Repo assets and liabilities of OFIs increased in 2018, with the net repo position remaining largely unchanged. Growth in repo assets of banks exceeded that of repo liabilities.

Section 3 assesses the interconnectedness among financial entities, both within and across borders. Interconnectedness between banks and OFIs through credit and funding relationships has remained largely unchanged since 2016, after declining from its 2009 levels. Investment funds and money market funds remain the largest OFI sub-sectors that provide credit to banks.

Section 4 focuses on those parts of NBFI where bank-like financial stability risks may arise. This narrow measure of NBFI grew by 1.7%, to $50.9 trillion in 2018, compared to an average annual growth rate of 8.5% from 2012 to17. It now represents 13.6% of total global financial assets. The narrow measure, which reflects an activity-based “economic function” (EF) assessment of risks, includes the following elements:

Narrowing down from MUNFI: 29 jurisdictions at end-2018, in USD trillion

The narrow measure, which reflects an activity-based “economic function” (EF) assessment of risks, includes the following elements:

  • Collective investment vehicles (CIVs) with features that make them susceptible to runs (EF1) grew by 0.4% in 2018, much less than the 11.0% average annual growth rate from 2012 to 2017. CIVs represent 72.0% of the narrow measure. Two of the largest EF1 entity types, money market funds and fixed income funds, invest primarily in credit assets and engage in liquidity and maturity transformation.
  • Non-bank financial entities engaging in loan provision that is dependent on short-term funding (EF2) grew by 6.9% in 2018, representing 7.0% of the narrow measure. Finance companies, the entity type most commonly classified into EF2, displayed a somewhat elevated degree of leverage, but have moderate maturity transformation in most jurisdictions.
  • Market intermediaries that depend on short-term funding or secured funding of client assets (EF3) grew by 8.7% in 2018, representing 8.8% of the narrow measure. Broker-dealers that are not prudentially consolidated into banking groups constitute the largest EF3 entity type; they employ significant leverage, particularly when accounting for off-balance sheet exposures. Broker-dealer leverage increased modestly in 2018 in most jurisdictions. In aggregate, it remains lower than the levels seen in the lead up to the financial crisis.Evolution of the narrow measure by economic function
  • Entities involved in the facilitation of credit creation (EF4) grew by 5.0% in 2018. The size of these entities, which represent less than 1% of the narrow measure, may be significantly understated due to the difficulty in capturing off-balance sheet exposures. Assets of investment funds involved in credit derivatives have increased in recent years, and accounted for the biggest share of EF4 assets in 2018.
  • The nominal value of entities engaged in securitisation-based credit intermediation (EF5), such as securitisation vehicles, remained largely unchanged in 2018, representing 9.3% of the narrow measure. Assets of structured finance vehicles, which include collateralised loan obligations, grew by 9.7%, continuing the growth seen in 2017. However, this growth was offset by a decrease in the assets of Chinese trust companies, which fell by 21.7%.

Section 5 features case studies that discuss different aspects of NBFI in greater detail, including: (i) flow and valuation effects in the investment fund sector; (ii) the role of non-bank financial institutions in providing financing to commercial real estate; and (iii) the role of investment funds in cross-border capital flows.

Datasets from the report are publicly available for use in accordance with to the FSB’s normal terms and conditions.

FSB publishes annual report on non-bank financial intermediation

Press enquiries:
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[email protected]
Ref no: 1/2020

The Financial Stability Board (FSB) today published the Global Monitoring Report on Non-Bank Financial Intermediation 2019. The report presents the results of the FSB’s annual monitoring exercise to assess global trends and risks from non-bank financial intermediation (NBFI).

The annual monitoring exercise is an important part of the FSB’s policy framework to enhance the resilience of NBFI. It covers data up to end-2018 from 29 jurisdictions, which together represent over 80% of global GDP. The FSB focuses particularly on those parts of NBFI that may pose bank-like financial stability risks and/or regulatory arbitrage (i.e. the narrow measure of NBFI).

Main findings from the 2019 monitoring exercise include:

  • Total global financial assets grew by 1.4% to $378.9 trillion in 2018, driven largely by banks. Assets of insurance corporations and pension funds remained largely unchanged, while those of Other Financial Intermediaries (OFIs)1 declined marginally as a result of stock market declines in late 2018 and, to a lesser extent, outflows from some of these entities.

  • The narrow measure of NBFI grew by 1.7%, to $50.9 trillion in 2018, significantly slower than the 2012-17 average annual growth rate of 8.5%. It now represents 13.6% of total global financial assets. Collective investment vehicles with features that make them susceptible to runs grew by 0.4% in 2018, much slower than the 11% average annual growth rate from 2012-17. At the end of 2018, such collective investment vehicles represented 72% of the narrow measure.

  • Lending by OFIs has continued to grow. OFI lending assets grew by 3.0% in 2018, largely driven by the euro area.

  • Interconnectedness between banks and OFIs through credit and funding relationships has been largely unchanged since 2016. Investment funds and money market funds remain the largest OFI providers of credit to banks.

Klaas Knot, Chair of the FSB Standing Committee on Assessment of Vulnerabilities, said: “Non-banks play an increasingly important role in the global financial system. The FSB’s monitoring report provides a significant resource for authorities to assess trends and risks from NBFI. Such information is essential for a forward-looking, system-wide oversight framework.”

Notes to editors

In response to a G20 Leaders’ request at the Seoul Summit in 2010, the FSB adopted a two-pronged strategy to address financial stability risks in NBFI (previously called shadow banking). First, it created a system-wide monitoring framework to track developments in NBFI with a view to identifying the build-up of systemic risks and initiating corrective actions where necessary. Second, it has been coordinating and contributing to the development of policies to mitigate potential systemic risks associated with NBFI.

The FSB will continue to monitor and assess developments to ensure that non-bank financing is resilient. As noted in its work programme for 2020, the FSB will further strengthen its annual NBFI monitoring exercise and data framework to assess the evolution of risks from NBFI developments globally. It will also review the organisation of its work on NBFI this 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, Governor and Vice Chairman for Supervision, 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.

Press release available as: PDF
  1. OFIs includes all financial institutions that are not central banks, banks, insurance corporations, pension funds, public financial institutions or financial auxiliaries. [←]

2019 Underlying data for exhibits

16 January 2020