FSB sets out 2020 work programme

17 December 2019

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Ref no: 47/2019

The Financial Stability Board (FSB) today published its work programme for 2020. The FSB’s work priorities for 2020 reflect the evolving nature of the global financial system and associated risks to financial stability. The FSB will reinforce its forward-looking monitoring of developments to identify, assess and address new and emerging vulnerabilities. At the same time, the FSB will continue its work to finalise and operationalise the remaining elements of post-crisis reforms; monitor and assess the implementation of reforms; and evaluate their effects in order to ensure that reforms work as intended.

Important specific FSB work programme items, which include key deliverables to the G20 Saudi Arabian Presidency, are:

  • FinTech. The FSB will continue to monitor financial innovation developments and assess their potential implications for financial stability. Complementing the recent report on BigTech in finance, the FSB will report on the perspective of emerging market and developing economies on this topic. The FSB will also take stock of the range of practices on the use of RegTech and SupTech.

  • Global stablecoins. The introduction of so-called global “stablecoins” could pose a host of challenges to the regulatory community, including for financial stability. At the same time, it could bring benefits to the financial system and wider economy. The FSB will issue a public consultation on addressing regulatory issues of stablecoins in April.

  • Cross-border payment systems. Payment systems are a central pillar of the global financial system and economy. Digital innovation could improve the efficiency and inclusiveness of cross-border payment services, which are often considered to be slow and costly. In coordination with the Committee on Payments and Market Infrastructures and other relevant international organisations and standard-setting bodies, the FSB will develop and deliver to the G20 a roadmap for how to enhance global cross-border payments.

  • Interest rate benchmarks. Continued reliance of global financial markets on LIBOR poses risks to financial stability. Transition away from LIBOR by end-2021 requires significant commitment and sustained effort from both financial and non-financial firms across many jurisdictions. To improve understanding and increase awareness of the importance of ensuring timely transition, the FSB will take stock of the implementation of benchmark reforms and report on remaining challenges to benchmark transition..

  • Ongoing evaluation work. The FSB will take forward its multi-year programme for evaluating the effects of reforms under its Evaluation Framework. In 2020, this includes the completion of an evaluation of the effects of TBTF reforms for banks and the launch of an evaluation of the effects of money market fund reforms.

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.

Consolidated Basel Framework – definition of capital (CAP)

15 December 2019

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This standard describes the criteria that bank capital instruments must meet to be eligible to satisfy the Basel capital requirements, as well as necessary regulatory adjustments and transitional arrangements.

Three categories of instruments are permitted, each governed by a single set of criteria that instruments are required to meet before inclusion in the relevant category. These are common Equity Tier 1 (going-concern capital), additional Tier 1 (going-concern capital) and tier 2 Capital (gone-concern capital). Total regulatory capital is the sum of Common Equity Tier 1, Additional Tier 1 and Tier 2 capital, net of regulatory adjustments.

Consolidated Basel Framework – calculation of RWA for operational risk (OPE)

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This standard describes how to calculate capital requirements for operational risk. The framework outlined in this standard presents three methods for calculating operational risk capital requirements in a continuum of increasing sophistication and risk sensitivity, viz., the Basic Indicator Approach, the Standardised Approach and Advanced Measurement Approaches (AMAs).

Consolidated Basel Framework – leverage ratio (LEV)

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This standard describes the simple, transparent, non-risk-based leverage ratio. This measure intends to restrict the build-up of leverage in the banking sector and reinforce the risk-based requirements with a simple, non-risk-based “backstop” measure.

Consolidated Basel Framework – liquidity coverage ratio (LCR)

Last updated: December 2022

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This standard describes the Liquidity Coverage Ratio, a measure which promotes the short-term resilience of a bank’s liquidity risk profile.

The LCR standard and monitoring tools should be applied to all internationally active banks on a consolidated basis, but may be used for other banks and on any subset of entities of internationally active banks as well to ensure greater consistency and a level playing field between domestic and cross-border banks. The LCR standard and monitoring tools should be applied consistently wherever they are applied.

Consolidated Basel Framework – net stable funding ratio (NSF)

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The net stable funding ratio requires banks to maintain a stable funding profile in relation to the composition of their assets and off-balance-sheet activities.

Consolidated Basel Framework – margin requirements (MGN)

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Appropriate margining practices should be in place with respect to all derivatives transactions that are not cleared by central counterparties (CCPs). This standard establishes minimum standards for margin requirements for non-centrally cleared derivatives. Such requirements reduce systemic risk with respect to non-standardised derivatives by reducing contagion and spillover risks and promoting central clearing.

Consolidated Basel Framework – supervisory review process (SRP)

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The supervisory review process of the Framework is intended not only to ensure that banks have adequate capital and liquidity to support all the risks in their business, but also to encourage banks to develop and use better risk management techniques in monitoring and managing their risks.

Consolidated Basel Framework – disclosure requirements (DIS)

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The provision of meaningful information about common key risk metrics to market participants is a fundamental tenet of a sound banking system. It reduces information asymmetry and helps promote comparability of banks’ risk profiles within and across jurisdictions. Pillar 3 of the Basel framework aims to promote market discipline through regulatory disclosure requirements. These requirements enable market participants to access key information relating to a bank’s regulatory capital and risk exposures in order to increase transparency and confidence about a bank’s exposure to risk and the overall adequacy of its regulatory capital.