Supervisory guidelines on the integration of ESG factors in the investment and risk management of pension funds

22 October 2019

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The IOPS supervisory guidelines propose, inter alia, that pension supervisory authorities should clarify to a pension fund governing body or the asset managers that the explicit integration of ESG factors into pension fund investment and risk management process is in line with their fiduciary duties and require that entities involved in the development and implementation of the pension fund’s investment policy integrate ESG factors, along with all substantial financial factors, into their investment strategies.

The IOPS encourages supervisory authorities to voluntarily adopt and implement the guidelines. The guidelines are non-binding and mean to provide guidance and serve as a reference point for supervisory authorities. The guidelines do not intend to induce pension funds into ESG investment. They also introduce the principle of proportionality, i.e. taking into account the size and capacities of particular pension funds, and are flexible enough to take into consideration all local circumstances.

Regulatory issues of stablecoins

18 October 2019 | PDF full text (227 KB)

This note sets out regulatory issues of stablecoins. The paper was delivered to G20 Finance Ministers and Central Bank Governors for their meeting in Washington D.C in mid-October. It responds to the G20 Leaders’ Osaka Declaration, which noted the importance of monitoring developments in crypto-assets and remaining vigilant to existing and emerging risks, and asked the FSB and other standard‑setting bodies to advise on additional multilateral responses as needed.

The launch of stablecoin-type arrangements for domestic and cross-border retail payments with the potential to reach global scale could alter the current assessment that crypto-assets do not pose a material risk to financial stability.

At the same time, the emergence of global stablecoins that could be used for cross-border payments and remittances by a large number of users in different countries could provide benefits to the financial system and the broader economy.

Harnessing those potential benefits, while containing associated risks for the financial system, requires adequate and comprehensive regulatory and oversight arrangements to ensure that any potential risks to financial stability and market functions can be identified and adequately addressed.

An effective regulatory and supervisory approach needs to be able to identify, monitor and address potential risks in a reasonable range of scenarios and use cases. In order to implement the G20 mandate, and building on earlier work by the G7, the FSB will:

  • Take stock of existing supervisory and regulatory approaches and emerging practices in this field, with a focus on cross-border issues and taking into account the perspective of emerging markets and developing economies.

  • Based on the stocktake, consider whether existing supervisory and regulatory approaches are adequate and effective in addressing financial stability and systemic risk concerns that could arise from the individual components of a stablecoin arrangement or their interaction as an ecosystem as a whole.

  • Advise on possible multilateral responses, if deemed necessary, including developing regulatory and supervisory approaches to addressing financial stability and systemic risk concerns at the global level.

The FSB will submit a consultative report to G20 Finance Ministers and Central Bank Governors in April 2020, and a final report in July 2020.

FSB sets out work to consider regulatory issues of stablecoins

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Ref no: 36/2019

The Financial Stability Board (FSB) today published an issues note on regulatory issues of stablecoins.  The paper was delivered to G20 Finance Ministers and Central Bank Governors for their meeting in Washington D.C this week. It responds to the G20 Leaders’ Osaka Declaration, which noted the importance of monitoring developments in crypto-assets and remaining vigilant to existing and emerging risks, and asked the FSB and other standard‑setting bodies to advise on additional multilateral responses as needed.

The launch of stablecoin-type arrangements for domestic and cross-border retail payments with the potential to reach global scale could alter the current assessment that crypto-assets do not pose a material risk to financial stability.

At the same time, the emergence of global stablecoins that could be used for cross-border payments and remittances by a large number of users in different countries could provide benefits to the financial system and the broader economy.

Harnessing those potential benefits, while containing associated risks for the financial system, requires adequate and comprehensive regulatory and oversight arrangements to ensure that any potential risks to financial stability and market functions can be identified and adequately addressed.

An effective regulatory and supervisory approach needs to be able to identify, monitor and address potential risks in a reasonable range of scenarios and use cases. In order to implement the G20 mandate, and building on earlier work by the G7, the FSB will:

  • Take stock of existing supervisory and regulatory approaches and emerging practices in this field, with a focus on cross-border issues and taking into account the perspective of emerging markets and developing economies.

  • Based on the stocktake, consider whether existing supervisory and regulatory approaches are adequate and effective in addressing financial stability and systemic risk concerns that could arise from the individual components of a stablecoin arrangement or their interaction as an ecosystem as a whole.

  • Advise on possible multilateral responses, if deemed necessary, including developing regulatory and supervisory approaches to addressing financial stability and systemic risk concerns at the global level.

The FSB will submit a consultative report to G20 Finance Ministers and Central Bank Governors in April 2020, and a final report in July 2020.

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, De Nederlandsche Bank. The FSB Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements.

Implementation and Effects of the G20 Financial Regulatory Reforms: Fifth Annual Report

16 October 2019 | PDF full text (2 MB)

This is the fifth annual report on the implementation and effects of the G20 financial regulatory reforms.

The report, which was delivered to the G20 meeting in October, sets out that implementation of the reforms called for by the G20 after the global financial crisis is progressing. This is contributing to an open and resilient financial system that supports the efficient provision of financing to the real economy.

Yet it is critical to maintain momentum and avoid complacency, in order to fully achieve the goal of greater resilience as vulnerabilities are evolving. Rapid structural and technological change require continued vigilance to maintain a sound and efficient financial system.

An open and resilient financial system, grounded in agreed international standards, is crucial to support sustainable growth. It requires the support of the G20 in implementing the agreed reforms and reinforcing global regulatory cooperation.

The report in particular recommends that:

  • Regulatory and supervisory bodies should lead by example in promoting the timely, full and consistent implementation of remaining reforms. This will support a level playing field and avoid regulatory arbitrage.

  • Frameworks for cross-border cooperation between authorities should also be enhanced in order to build trust, allow the sharing of information, and preserve an open and integrated global financial system.

  • Authorities should evaluate whether the reforms are achieving their intended outcomes, identify any material unintended consequences, and address these without compromising on the objectives of those reforms.

Financial stability authorities should continue to contribute to the FSB’s monitoring of emerging risks and stand ready to act if such risks materialise.

The report includes a colour-coded dashboard that summarises the status of implementation across FSB jurisdictions for priority reform areas.

Implementation of reforms in priority areas by FSB jurisdictions

Click the image to see in full-size.

Together with the report the FSB published annual survey responses by its member jurisdictions on implementation of other areas of reform together with summary tables and jurisdiction profiles on implementation progress. Taken together, these reports provide a holistic picture of the implementation of the G20 reforms.

FSB publishes annual report on implementation and effects of financial regulatory reforms

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Ref no: 36/2019

The Financial Stability Board (FSB) today published its 2019 annual report on the implementation and effects of the G20 financial regulatory reforms.

The report, which has been delivered to the G20 meeting this week, sets out that implementation of the reforms called for by the G20 after the global financial crisis is progressing. This is contributing to an open and resilient financial system that supports the efficient provision of financing to the real economy.

Yet it is critical to maintain momentum and avoid complacency, in order to fully achieve the goal of greater resilience as vulnerabilities are evolving. Rapid structural and technological change require continued vigilance to maintain a sound and efficient financial system.

An open and resilient financial system, grounded in agreed international standards, is crucial to support sustainable growth. It requires the support of the G20 in implementing the agreed reforms and reinforcing global regulatory cooperation.

The report in particular recommends that:

  • Regulatory and supervisory bodies should lead by example in promoting the timely, full and consistent implementation of remaining reforms. This will support a level playing field and avoid regulatory arbitrage.

  • Frameworks for cross-border cooperation between authorities should also be enhanced in order to build trust, allow the sharing of information, and preserve an open and integrated global financial system.

  • Authorities should evaluate whether the reforms are achieving their intended outcomes, identify any material unintended consequences, and address these without compromising on the objectives of those reforms.

  • Financial stability authorities should continue to contribute to the FSB’s monitoring of emerging risks and stand ready to act if such risks materialise.

Notes to editors

This report includes an implementation dashboard that summarises, in a colour-coded table, the status of implementation across FSB jurisdictions for priority reform areas. As part of its reporting, the FSB also published today the latest annual survey responses by its member jurisdictions on implementation of other areas of reform together with summary tables and jurisdiction profiles on implementation progress. Taken together, these reports provide a comprehensive picture of the implementation of the G20 financial regulatory reforms.

As part of its ongoing evaluation work, the FSB published a consultation paper in June 2019 that examined the effects of the post-crisis financial regulatory reforms on the financing of small and medium-sized enterprises. The FSB will publish its finalised report on this topic next month, taking account of public comments.

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, De Nederlandsche Bank. The FSB Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements.

OTC Derivatives Market Reforms: 2019 Progress Report on Implementation

15 October 2019 | PDF full text (2 MB)

This annual progress report on the implementation of the agreed G20 reforms to over-the-counter (OTC) derivatives markets concludes that overall there has been limited additional implementation of the reforms. The report notes the following progress:

  • Trade reporting: 23 out of 24 member jurisdictions have comprehensive requirements in force, an increase of one during the reporting period. Jurisdictions report efforts to reduce reporting barriers and masking relief, wider use of the legal entity identifier in trade reporting, and streamlining reporting processes and trade repository operations. Authorities are increasingly aggregating data from multiple trade repositories.

  • Central clearing: Eighteen jurisdictions have in force comprehensive standards/criteria for determining when standardised OTC derivatives should be centrally cleared. In a few of these 18 jurisdictions, a wider range of products is now subject to mandatory clearing. Central counterparties (CCPs) have been active, with some CCPs filing for authorisation to clear transactions involving new asset classes in a number of jurisdictions, and other CCPs withdrawing from certain market segments.

  • Margin requirements: Sixteen jurisdictions have in force comprehensive margin requirements for non-centrally cleared derivatives, which represents an increase of one during the reporting period. Estimates of collateralisation rates are available in 10 of these 16 jurisdictions and continue to increase, particularly in credit and equity derivatives.

  • Higher capital requirements for non-centrally cleared derivatives: Interim higher capital requirements for non-centrally cleared derivatives are in force in 23 of the 24 FSB member jurisdictions. Only seven jurisdictions (albeit four more than at end-November 2018) have implemented the final capital requirements, both due to have been implemented by January 2017.

  • Platform trading: Comprehensive platform trading requirements are in force in 13 jurisdictions, a number which has remained unchanged during the reporting period.

  • Cross-border coordination and issues: one jurisdiction started exercising deference during the reporting period with regard to foreign jurisdictions’ regimes. Several other jurisdictions extended deference to further jurisdictions.

FSB reports on implementation of OTC derivative reforms

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Ref no: 35/2019

The Financial Stability Board (FSB) today published its annual progress report on the implementation of the agreed G20 reforms to over-the-counter (OTC) derivatives markets. Overall there has been limited additional implementation of the reforms between end-November 2018 and end-September 2019. The report notes the following progress:

  • Trade reporting: 23 out of 24 member jurisdictions have comprehensive requirements in force, an increase of one during the reporting period. Jurisdictions report efforts to reduce reporting barriers and masking relief, wider use of the legal entity identifier in trade reporting, and streamlining reporting processes and trade repository operations. Authorities are increasingly aggregating data from multiple trade repositories.

  • Central clearing: Eighteen jurisdictions have in force comprehensive standards/criteria for determining when standardised OTC derivatives should be centrally cleared. In a few of these 18 jurisdictions, a wider range of products is now subject to mandatory clearing. Central counterparties (CCPs) have been active, with some CCPs filing for authorisation to clear transactions involving new asset classes in a number of jurisdictions, and other CCPs withdrawing from certain market segments.

  • Margin requirements: Sixteen jurisdictions have in force comprehensive margin requirements for non-centrally cleared derivatives, which represents an increase of one during the reporting period. Estimates of collateralisation rates are available in 10 of these 16 jurisdictions and continue to increase, particularly in credit and equity derivatives.

  • Higher capital requirements for non-centrally cleared derivatives: Interim higher capital requirements for non-centrally cleared derivatives are in force in 23 of the 24 FSB member jurisdictions. Only seven jurisdictions (albeit four more than at end-November 2018) have implemented the final capital requirements, both due to have been implemented by January 2017.

  • Platform trading: Comprehensive platform trading requirements are in force in 13 jurisdictions, a number which has remained unchanged during the reporting period.

  • Cross-border coordination and issues: One jurisdiction started exercising deference during the reporting period with regard to foreign jurisdictions’ regimes. Several other jurisdictions extended deference to further jurisdictions.

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, De Nederlandsche Bank. The FSB Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements.

Updates on the Work on Market Fragmentation

14 October 2019 | PDF full text (164 KB)

This report provides progress updates for the ongoing work on market fragmentation by the FSB and standard-setting bodies. The report was delivered to the G20 Finance Ministers and Central Bank Governors ahead of their meeting in Washington D.C. in mid-October.

In its June report on market fragmentation, the FSB identified four areas for further work to address market fragmentation: (i) deference; (ii) pre-positioning of capital and liquidity; (iii) regulatory and supervisory coordination and information-sharing; and (iv) market fragmentation as part of the evaluation of reforms, starting with the FSB’s ongoing “too-big-to-fail” evaluation.

Since the June 2019 Osaka G20 Summit, the FSB, in collaboration with the standard-setting bodies, have identified steps to be taken in each of these four areas. The update provides information on current plans, and steps already taken, to implement the work in the four areas.

FSB updates on market fragmentation work

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Ref no: 34/2019

The Financial Stability Board (FSB) today published an update on its work on market fragmentation. The update has been delivered to G20 Finance Ministers and Central Bank Governors for their meeting in Washington D.C. later this this week.

In its June report on market fragmentation, the FSB identified four areas for further work to address market fragmentation: (i) deference; (ii) pre-positioning of capital and liquidity; (iii) regulatory and supervisory coordination and information-sharing; and (iv) market fragmentation as part of the evaluation of reforms, starting with the FSB’s ongoing “too-big-to-fail” evaluation.

Since the June 2019 Osaka G20 Summit, the FSB, in collaboration with the standard-setting bodies, have identified steps to be taken in each of these four areas. The update provides information on current plans, and steps already taken, to implement the work in the four areas.

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, De Nederlandsche Bank. The FSB Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements.

FSB Chair reports to G20 Finance Ministers and Central Bank Governors

13 October 2019

Press enquiries:
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Ref no: 33/2019

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 Washington D.C. this week.

The letter notes that the development of post-crisis reform policies is nearly complete and implementation is well underway. Yet it emphasises that the FSB’s mission is far from complete. Implementation progress on agreed G20 reforms remains uneven across key reform areas, and the FSB is in the process of evaluating that reforms are working as intended. Looking ahead, authorities need to be ready to address evolving risks to global financial stability, be they related to current downside risks to growth and uncertainties around Brexit, or structural changes in the financial system.

The letter highlights three areas of the FSB’s work:

  • Ensuring resilience in the face of new risks. Increasing risks meet a financial system that is much more resilient than it was before the financial crisis. However, the long period of sustained global growth and rising asset prices may have weakened the incentives to take precautions against unforeseen events. The FSB is conducting an in-depth analysis of the markets for leveraged loans and collateralized loan obligations. The FSB is also assessing the financial stability implications of structural changes in the financial system, including non-bank finance and technological innovation.
  • Potential financial stability issues from global stablecoins. Stablecoin projects of potentially global reach and magnitude must meet the highest regulatory standards and be subject to prudential supervision and oversight. Possible regulatory gaps should be assessed and addressed as a matter of priority. The FSB has formed a working group, to inform regulatory policy approaches that harness the benefits of financial innovation, while containing associated risks for the financial system, and advise on multilateral responses as necessary. The FSB will submit a consultative report to the G20 in April and a final report in July 2020.
  • Promoting a financial system that supports strong and sustainable global growth. Following its June report on addressing instances of harmful market fragmentation the FSB has submitted a progress report to the G20 on its further work in this area. The FSB is also taking forward its multi-year programme of rigorous evaluation of post-crisis reforms. The evaluation of the effects of those reforms on small and medium-sized enterprises, is nearing completion, while the evaluation of the effects of too-big-to fail reforms for banks is underway.

Notes to editors

The FSB will publish its annual report on implementation and effects of the G20 financial regulatory reforms on 16 October.

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, De Nederlandsche Bank. The FSB Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements.