2019 Monitoring Dataset
16 January 2020
2019 Reporting templates
Clock Synchronisation
View the Standard
Accurate and precise time stamps can help regulators reconstruct past events, which may occur on different markets or in different jurisdictions. Regulatory authorities can better use time stamps from synchronised clocks to more effectively monitor and identify instances of potential market abuse and analyse market events for regulatory purposes. Therefore, IOSCO believes that member jurisdictions would likely benefit from establishing a common expectation with respect to timestamping and clock synchronisation for the purposes of recording trade and related events.
Given the heterogeneity of the markets across member jurisdictions, each market authority is best placed to determine an acceptable level of accuracy and granularity of the timestamp in their jurisdiction. However, IOSCO recommends that member jurisdictions use UTC as the standard reference time source to the extent that they have adopted or are considering adopting requirements on clock synchronisation. In jurisdictions with clock synchronisation requirements for trading venues and their participants, setting out a reference time is important in clarifying the timestamping requirement on reportable events. This may be achieved in various ways as jurisdictions have different regulatory frameworks and approaches, and not all regulators require time stamping by registered entities and so do not necessarily require a regulatory change.
Financial Soundness Indicators Compilation Guide (2019 FSIs Guide)
27 December 2019
View the Standard
The purpose of this Manual is to facilitate the compilation and cross-country comparability of FSIs to assist users in their macroprudential financial surveillance of the financial system. It incorporates changes in international regulatory standards embodied in the Basel III reform – including new definitions and measures of capital and new global liquidity standards, as well as revisions to the International Financial Reporting Standards, while providing practical advice on compilation issues, which are relevant for macroprudential policy and financial stability analysis.
Solvent Wind-down of Derivatives and Trading Portfolios: Overview of responses to the consultation
20 December 2019 | PDF full text (147 KB)
On 3 June 2019, the FSB published a consultative document on Solvent Wind-down of Derivatives and Trading Portfolios. The note summarises the responses to the public consultation and provides an overview of the responses to those comments.
After carefully considering these comments and the fact that many capabilities necessary to support the preparation and execution of solvent wind-down are not specific to solvent wind-down planning, the FSB has decided not to develop further guidance at this stage. Since solvent wind-down planning is an integral part of resolution planning, it needs to be consistent with a firm’s resolution strategy and plan. The FSB will therefore continue to promote solvent wind-down planning as part of overall resolution planning.
Public Disclosures on Resolution Planning and Resolvability: Overview of responses to the consultation
On 3 June 2019, the FSB published a consultative document on Public Disclosure of Resolution Planning and Resolvability. The note summarises the main points from the responses to this public consultation.
The FSB does not plan to develop further guidance on resolution disclosures at this stage. However, it will continue to encourage appropriate levels of disclosure by authorities of their general resolution policies and by firms, as applicable, of firm-specific disclosures. It will also consider how to collect and share references to authorities’ disclosures of general resolution-related policies, including policy proposals, in particular rules with possible cross-border effects. In 2022, the FSB will revisit the question of whether further guidance is needed.
Vulnerabilities associated with leveraged loans and collateralised loan obligations
19 December 2019 | PDF full text (2 MB)
This report assesses the financial stability implications of developments in the leveraged loan and CLO markets. It provides a global perspective by combining available data and analyses from FSB members.
Markets for leveraged loans and CLOs have grown significantly in recent years, with the majority of issuance concentrated in the US and to a lesser extent the European Union. The securitisation of leveraged loans through CLO issuance, which had come to a halt almost entirely between 2009 and 2010, exceeded pre-crisis levels in 2014 and has remained strong since then. While most leveraged loans are originated and held by banks, and banks have the largest exposure to the market, the role of non-bank financial institutions has increased.
The report concludes that:
- Vulnerabilities in the leveraged loan and CLO markets have grown since the global financial crisis. Borrowers’ leverage has increased; changes in loan documentation have weakened creditor protection; and shifts in the composition of creditors of non-banks may have increased the complexity of these markets.
- Banks have the largest direct exposures to leveraged loans and CLOs. These exposures are concentrated among a limited number of large global banks and have a significant cross-border dimension.
- A number of non-bank investors, including investment funds and insurance companies, are also exposed to the leveraged loan and CLO markets.
- Given data gaps, a comprehensive assessment of the system-wide implications of the exposures of financial institutions to leveraged loans and CLOs is challenging.
Using supervisory and market data, the report identifies the direct holders of roughly 79% of leveraged loans and 86% of CLOs. Little is known, however, about the direct exposures of certain non-bank investors to these markets. Including their holdings of lower-rated CLO tranches. The FSB will consider whether there is scope to close data gaps, will continue to analyse the financial stability risks and will discuss the regulatory and supervisory implications associated with leveraged loans and CLOs.
FSB report assesses vulnerabilities of leveraged loans and CLOs
Press enquiries:
+41 61 280 8138
[email protected]
Ref no: 45/2019
The Financial Stability Board (FSB) today published a report on Vulnerabilities associated with leveraged loans and collateralised loan obligations (CLOs). The report assesses the financial stability implications of developments in the leveraged loan and CLO markets. It provides a global perspective by combining available data and analyses from FSB members.
Markets for leveraged loans and CLOs have grown significantly in recent years, with the majority of issuance concentrated in the US and to a lesser extent the European Union. The securitisation of leveraged loans through CLO issuance, which had come to a halt almost entirely between 2009 and 2010, exceeded pre-crisis levels in 2014 and has remained strong since then. While most leveraged loans are originated and held by banks, and banks have the largest exposure to the market, the role of non-bank financial institutions has increased.
The report concludes that:
- Vulnerabilities in the leveraged loan and CLO markets have grown since the global financial crisis. Borrowers’ leverage has increased; changes in loan documentation have weakened creditor protection; and shifts in the composition of creditors of non-banks may have increased the complexity of these markets.
- Banks have the largest direct exposures to leveraged loans and CLOs. These exposures are concentrated among a limited number of large global banks and have a significant cross-border dimension.
- A number of non-bank investors, including investment funds and insurance companies, are also exposed to the leveraged loan and CLO markets.
- Given data gaps, a comprehensive assessment of the system-wide implications of the exposures of financial institutions to leveraged loans and CLOs is challenging.
Using supervisory and market data, the report identifies the direct holders of roughly 79% of leveraged loans and 86% of CLOs. Little is known, however, about the direct exposures of certain non-bank investors to these markets. Including their holdings of lower-rated CLO tranches. The FSB will consider whether there is scope to close data gaps, will continue to analyse the financial stability risks and will discuss the regulatory and supervisory implications associated with leveraged loans and CLOs.
FSB Chair Randal K. Quarles said: “Scanning the horizon to identify, assess and address new and emerging risks to global financial stability is at the core of the FSB mandate. This report provides a fact base that authorities and market participants can use to help assess the risks posed by leveraged loan and CLO markets and respond accordingly.”
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, 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 report sets out need to reduce risks to financial stability from LIBOR transition
18 December 2019
Press enquiries:
+41 61 280 8138
[email protected]
Ref no: 48/2019
The Financial Stability Board (FSB) today 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 by end-2021.
Interest rate benchmarks play a key role in global financial markets. In 2014 the FSB made recommendations to reform interbank offered rates (IBORs) in response both to cases of attempted manipulation and to the decline in liquidity in key interbank unsecured funding markets.
The report sets out progress on implementing the FSB recommendations and finds that:
- There is a common view across FSB jurisdictions that the use of overnight risk-free rates should be encouraged across global interest rates markets where appropriate, and that contracts referencing IBORs should have robust fallbacks.
- There has been good progress in many derivatives and securities markets, but transition in lending markets has been slower, and needs to accelerate.
- Firms undertaking their transition away from LIBOR should not delay their programmes until the emergence of possible forward-looking term versions of risk-free rates.
- The parallel efforts on transition across multiple jurisdictions and currencies are an opportunity to align conventions and other practices across currencies and products.
- Transition requires significant commitment from the official sector, working alongside market participants.
- Given the degree of risk arising from the continued reliance on LIBOR, regulated firms should expect increasing scrutiny of their transition efforts as the end of 2021 approaches
Andrew Bailey and John Williams, co-chairs of the FSB Official Sector Steering Group, said: “FSB members are committed to transitioning to more robust financial benchmarks. It is essential that both firms and national authorities around the world take steps now to ensure a smooth transition. As a matter of priority, authorities should discuss with financial institutions, and financial institutions with their clients, the transition process and agree on the steps needed.”
The FSB announced on 17 December, as part of its 2020 work programme, that it will conduct a survey of exposures to LIBOR and supervisory measures being taken to address benchmark transition issues, in order to improve collective understanding of LIBOR transition progress so far and to increase awareness of the importance of ensuring timely transition.
The FSB will deliver to G20 Finance Ministers and Central Bank Governors in July 2020, and publish, a report on remaining challenges to benchmark transition.
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, 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.
Reforming major interest rate benchmarks: Progress report
This annual progress report on the transition to more robust financial benchmarks, 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 by end-2021.
Interest rate benchmarks play a key role in global financial markets. In 2014 the FSB made recommendations to reform interbank offered rates (IBORs) in response both to cases of attempted manipulation and to the decline in liquidity in key interbank unsecured funding markets.
The report sets out progress on implementing the FSB recommendations and finds that:
- There is a common view across FSB jurisdictions that the use of overnight risk-free rates should be encouraged across global interest rates markets where appropriate, and that contracts referencing IBORs should have robust fallbacks.
- There has been good progress in many derivatives and securities markets, but transition in lending markets has been slower, and needs to accelerate.
- Firms undertaking their transition away from LIBOR should not delay their programmes until the emergence of possible forward-looking term versions of risk-free rates.
- The parallel efforts on transition across multiple jurisdictions and currencies are an opportunity to align conventions and other practices across currencies and products.
- Transition requires significant commitment from the official sector, working alongside market participants.
- Given the degree of risk arising from the continued reliance on LIBOR, regulated firms should expect increasing scrutiny of their transition efforts as the end of 2021 approaches
The FSB announced on 17 December, as part of its 2020 work programme, that it will conduct a survey of exposures to LIBOR and supervisory measures being taken to address benchmark transition issues, in order to improve collective understanding of LIBOR transition progress so far and to increase awareness of the importance of ensuring timely transition.
The FSB will deliver to G20 Finance Ministers and Central Bank Governors in July 2020, and publish, a report on remaining challenges to benchmark transition.