Evaluation of the effects of financial regulatory reforms on infrastructure finance

20 November 2018 | PDF full text (3 MB)

The evaluation is among the first under the FSB framework for the post-implementation evaluation of the effects of the G20 financial regulatory reforms, and forms part of a broader FSB examination of the effects of reforms on financial intermediation. It focuses on infrastructure finance that is provided in the form of corporate and project debt financing (loans and bonds), for which the financial regulatory reforms are of immediate relevance.

The report concludes that the effect of the G20 reforms on infrastructure finance has been of a second order relative to factors such as the macro-financial environment, government policy and institutional factors. In particular, for the reforms that have been largely implemented and are most relevant for this evaluation – namely, the initial Basel III capital and liquidity requirements (agreed in 2010) and over-the-counter derivatives reforms – the analysis does not identify material negative effects on the provision and cost of infrastructure finance to date.

The evaluation further finds that:

  • The overall amount of infrastructure finance has grown in recent years after a temporary drop during the financial crisis. Market-based finance – mainly project and particularly corporate bond issuance as well as non-bank financing – has accounted for most of the growth in advanced economies in recent years.

  • Lending spreads for infrastructure finance have returned to lower levels in recent years following a spike during the crisis, but remain above pre-crisis levels.

  • There are some key differences in the provision of infrastructure finance in emerging market and developing economies (EMDEs) compared to advanced economies. EMDEs tend to rely more on bank loans, have a higher proportion of cross-border financing, and use local currency less for financing purposes.

  • The reforms have contributed to shorter average maturities of infrastructure loans by global systemically important banks. This effect is not necessarily unintended, given that reducing banks’ maturity mismatch was one of the objectives of the reforms.

  • While not analysing the ex post effects of reforms on financial resilience, the evaluation has found no results to suggest that the wider benefits to the financial system from enhanced resilience – as estimated at an aggregate level in ex ante impact assessment studies – do not apply in the narrower context of infrastructure finance.

The analysis points to some substitution in recent years of bank financing by market-based financing in advanced economies, and the G20 banking reforms may have been one of the drivers for this rebalancing.

Evaluation of the effects of financial regulatory reforms on infrastructure finance: Overview of responses to the consultation

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On 18 July 2018, the FSB published a consultative document on the Evaluation of the effects of financial regulatory reforms on infrastructure finance. The FSB received responses to the public consultation from banks, insurers, development banks and industry associations. Respondents generally welcomed the consultative document, noting the importance of this evaluation given the contribution of infrastructure finance to economic growth.

This document summarises the issues raised in the public consultation and sets out the main changes that have been made to the evaluation report in order to address them.

FSB report finds that effects of G20 financial reforms on infrastructure finance are of a second order relative to other factors

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Ref no: 46/2018

The Financial Stability Board (FSB) published today its final report on the Evaluation of the effects of financial regulatory reforms on infrastructure finance, following public consultation earlier this year.

The evaluation is among the first under the FSB framework for the post-implementation evaluation of the effects of the G20 financial regulatory reforms, and forms part of a broader FSB examination of the effects of reforms on financial intermediation. It focuses on infrastructure finance that is provided in the form of corporate and project debt financing (loans and bonds), for which the financial regulatory reforms are of most immediate relevance.

The report concludes that the effect of the G20 reforms on infrastructure finance has been of a second order relative to factors such as the macro-financial environment, government policy and institutional factors. In particular, for the reforms that have been largely implemented and are most relevant for this evaluation – namely, the initial Basel III capital and liquidity requirements (agreed in 2010) and over-the-counter derivatives reforms – the analysis does not identify material negative effects on the provision and cost of infrastructure finance to date.

The evaluation further finds that:

  • The overall amount of infrastructure finance has grown in recent years after a temporary drop during the financial crisis. Market-based finance – mainly project and particularly corporate bond issuance as well as non-bank financing – has accounted for most of the growth in advanced economies in recent years.

  • Lending spreads for infrastructure finance have returned to lower levels in recent years following a spike during the crisis, but remain above pre-crisis levels.

  • There are some key differences in the provision of infrastructure finance in emerging market and developing economies (EMDEs) compared to advanced economies. EMDEs tend to rely more on bank loans, have a higher proportion of cross-border financing, and use local currency less for financing purposes.

  • The reforms have contributed to shorter average maturities of infrastructure loans by global systemically important banks. This effect is not necessarily unintended, given that reducing banks’ maturity mismatch was one of the objectives of the reforms.

  • While not analysing the ex post effects of reforms on financial resilience, the evaluation has found no results to suggest that the wider benefits to the financial system from enhanced resilience – as estimated at an aggregate level in ex ante impact assessment studies – do not apply in the narrower context of infrastructure finance.

  • The analysis points to some substitution in recent years of bank financing by market-based financing in advanced economies, and the G20 banking reforms may have been one of the drivers for this rebalancing.

The FSB also published today an overview of responses to the public consultation, which summarises the issues raised in the public consultation and sets out the main changes that have been made in the evaluation report to address them. 

Notes to editors

The FSB published in July 2017 a Framework for Post-Implementation Evaluation of the Effects of the G20 Financial Regulatory Reforms that guides analysis of whether the reforms are achieving their intended outcomes, and help identify material unintended consequences that may have to be addressed, without compromising on the objectives of the reforms. The framework provides the basis for dynamic implementation, and ensures that reforms remain fit for purpose amidst changing circumstances.

The report published today forms part of the evaluation of the G20 financial regulatory reforms on financial intermediation. The second part of the evaluation examines the effects of reforms on the financing of small and medium-sized enterprises and will be delivered to the G20 during the Japanese G20 Presidency in 2019. The FSB will also undertake an evaluation on the effects to date of reforms to end too-big-to-fail; that evaluation will be launched in early 2019 and completed in 2020.

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 65 other jurisdictions through its six Regional Consultative Groups.

The FSB is chaired by Mark Carney, Governor of the Bank of England. Its Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements.

Trade reporting legal barriers: Follow-up of 2015 peer review recommendations

19 November 2018 | PDF full text (584 KB)

Trade reporting data provides important information for authorities as they seek to assess risks in OTC derivatives markets. However, where barriers to the full reporting of trade data and to authorities’ access to this information exist, this reduces the usefulness of this data. This document reports on FSB member jurisdictions have taken to address legal barriers to reporting and accessing trade data sets identified in a 2015 peer review. Four of these recommendations included implementation dates in 2018, while the other two did not have specific implementation dates. The progress report finds:

  • Barriers to full trade reporting: All but three of the FSB’s member jurisdictions have removed or addressed barriers to full trade reporting.

  • Masking Five FSB member jurisdictions allow masking of counterparty identifiers for some transactions. As reported by jurisdictions, the percentage of masked trades is relatively low, typically 5% or under, with several under 1%.

  • Regulators’ access to trade repository data: In twelve jurisdictions, changes have been made or are underway to address or remove barriers to access to trade repository data by foreign authorities and/or non-primary domestic authorities, including legal barriers which have only very recently been removed.

A number of supplementary recommendations have been made by the FSB. The FSB will continue to monitor implementation.

OTC Derivatives Market Reforms: Thirteenth Progress Report on Implementation

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This report provides an update on the progress made across the G20’s over-the-counter (OTC) derivatives reform agenda. This includes trade reporting of OTC derivatives; central clearing and, where appropriate, exchange or electronic platform trading of standardised OTC derivatives; and higher capital and minimum margin requirements for non-centrally cleared derivatives.

Overall, good progress continued to be made across the G20’s reform agenda including work to assess whether the implemented reforms meet the intended objectives. The report concludes that:

  • Trade reporting: Twenty-one out of 24 FSB member jurisdictions have comprehensive trade reporting requirements in force, up by two since end-June 2017. Authorities are using trade repository data for a wide range of tasks, and incorporating it in their published work. Work continues internationally, including on data harmonisation.

  • Central clearing: Eighteen member jurisdictions now have in force comprehensive standards/criteria for determining when standardised OTC derivatives should be centrally cleared, and two more jurisdictions adopted mandatory clearing requirements during the reporting period.

  • Margin requirements for non-centrally cleared derivative (NCCDs): Sixteen jurisdictions have implemented comprehensive margin requirements for NCCDs, an increase of two. Estimated collateralisation rates have risen since end-2016.

  • Higher capital requirements for NCCDs: Interim higher capital requirements for non-centrally cleared derivatives are in force in 23 of the 24 member jurisdictions, unchanged over the reporting period. However, the number of jurisdictions that have implemented the final standardised approach for counterparty credit risk and capital requirements for bank exposures to central counterparties is much lower. Having regard to the 1 January 2017 recommended implementation date, jurisdictions are urged to implement those requirements without further delay.

  • Platform trading: Thirteen jurisdictions have in force comprehensive assessment standards or criteria for determining when products should be platform traded. New determinations entered into force for specific derivatives products to be executed on organised trading platforms in six jurisdictions. Transparency of information about OTC derivatives transactions has increased since end-2016.

  • Cross border coordination and issues: Jurisdictions reported continuing progress, both in establishing broad legal powers to exercise deference with regard to foreign jurisdictions’ regimes, but more particularly with regard to exercising those powers in particular cases. Notably, the EU and US (Commodity Futures Trading Commission (CFTC)) recognised each other’s regulatory regime for trading venues, while Australia, Japan and the US (CFTC) recognised one or more jurisdictions for the purposes of their margin requirements.

FSB publishes reports on implementation of OTC derivatives reforms and removal of legal barriers

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Ref no: 45/2018

The FSB today published the following two reports:

  • setting out progress on reforms to over-the-counter (OTC) derivatives markets1 and

  • reporting on FSB member jurisdictions’ actions to remove legal barriers relating to OTC derivatives trade reporting.

OTC Derivatives Market Reforms: Progress Report on Implementation

Overall, good progress continues to be made across the G20’s OTC derivatives reform agenda in the period from end-June 2017, including work to assess whether the implemented reforms meet the intended objectives. The report concludes that:

  • Trade reporting: Twenty-one out of 24 FSB member jurisdictions have comprehensive trade reporting requirements in force, up by two since end-June 2017. Authorities are using trade repository data for a wide range of tasks, and incorporating it in their published work. Work continues internationally, including on data harmonisation.

  • Central clearing: Eighteen member jurisdictions now have in force comprehensive standards/criteria for determining when standardised OTC derivatives should be centrally cleared, and two more jurisdictions adopted mandatory clearing requirements during the reporting period.

  • Margin requirements for non-centrally cleared derivative (NCCDs): Sixteen jurisdictions have implemented comprehensive margin requirements for NCCDs, an increase of two. Estimated collateralisation rates have risen since end-2016.

  • Higher capital requirements for NCCDs: Interim higher capital requirements for non-centrally cleared derivatives are in force in 23 of the 24 member jurisdictions, unchanged over the reporting period. However, the number of jurisdictions that have implemented the final standardised approach for counterparty credit risk and capital requirements for bank exposures to central counterparties is much lower. Having regard to the 1 January 2017 recommended implementation date, jurisdictions are urged to implement those requirements without further delay.

  • Platform trading: Thirteen jurisdictions have in force comprehensive assessment standards or criteria for determining when products should be platform traded. New determinations entered into force for specific derivatives products to be executed on organised trading platforms in six jurisdictions. Transparency of information about OTC derivatives transactions has increased since end-2016.

  • Cross-border coordination and issues: Jurisdictions reported continuing progress, both in establishing broad legal powers to exercise deference with regard to foreign jurisdictions’ regimes, but more particularly with regard to exercising those powers in particular cases. Notably, the EU and US (Commodity Futures Trading Commission (CFTC)) recognised each other’s regulatory regime for trading venues, while Australia, Japan and the US (CFTC) recognised one or more jurisdictions for the purposes of their margin requirements.

Trade reporting legal barriers: Follow-up of 2015 peer review recommendations

Trade reporting data provides important information for authorities as they seek to assess risks in OTC derivatives markets. However, where barriers to the full reporting of trade data and to authorities’ access to this information exist, this reduces the usefulness of this data. This document reports on actions FSB member jurisdictions have taken to address legal barriers to reporting and accessing trade data identified in a 2015 peer review. Four of these recommendations included implementation dates in 2018, while the other two did not have specific implementation dates. The progress report finds:

  • Barriers to full trade reporting: All but three of the FSB’s member jurisdictions have removed or addressed barriers to full trade reporting.

  • Masking: Five FSB member jurisdictions allow masking of counterparty identifiers for some transactions. As reported by jurisdictions, the percentage of masked trades is relatively low, typically 5% or under, with several under 1%.

  • Regulators’ access to trade repository data: In twelve jurisdictions, changes have been made or are underway to address or remove barriers to access to trade repository data by foreign authorities and/or non-primary domestic authorities, including legal barriers which have only very recently been removed.

A number of supplementary recommendations have been made by the FSB. The FSB will continue to monitor implementation.

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 Mark Carney, Governor of the Bank of England. Its Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements.

  1. These reforms are: trade reporting of OTC derivatives; central clearing and, where appropriate, exchange or electronic platform trading of standardised OTC derivatives; and higher capital and minimum margin requirements for non-centrally cleared derivatives. [←]

Incentives to centrally clear over-the-counter (OTC) derivatives

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This final report from the FSB, the Basel Committee on Banking Supervision (BCBS), the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) examines the effects of G20 financial regulatory reforms on the incentives to centrally clear over-the-counter (OTC) derivatives.

The central clearing of standardised OTC derivatives is a pillar of the G20 Leaders’ commitments to reform OTC derivatives markets in response to the financial crisis. A number of post-crisis reforms are, directly or indirectly, relevant to incentives to centrally clear. A large majority of the relevant international standards have been agreed upon and are being implemented. This evaluation is one of the first using the FSB framework for the post-implementation evaluation of the effects of the G20 financial regulatory reforms.

The report concludes that the reforms – particularly capital requirements, clearing mandates and margin requirements for non-centrally cleared derivatives – are achieving their goals of promoting central clearing, especially for the most systemic market participants. This is consistent with the goal of reducing complexity and improving transparency and standardisation in the OTC derivatives markets. Beyond the systemic core of the derivatives network of CCPs, dealers/clearing service providers and larger, more active clients, the incentives are less strong.

The report identifies reform areas that may merit consideration by the relevant standard-setting bodies (SSBs). The findings from the report will inform relevant SSBs regarding any subsequent policy efforts and potential adjustments, bearing in mind the original objectives of the reforms. This does not imply a scaling back of those reforms or an undermining of members’ commitment to implement them.

An earlier version of this report was subject to public consultation and responses to the consultation have informed the final report. An overview of responses to the public consultation, which summarises the issues raised in the public consultation launched in August and sets out the main changes that have been made to the report, can be found here.

Evaluation of incentives to centrally clear OTC derivatives: Overview of responses to the consultation

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The FSB, the Basel Committee on Banking Supervision (BCBS), the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) published a consultative document on incentives to centrally clear over-the-counter (OTC) derivatives on 7 August 2018. A total of 40 responses were received, including from banks, central counterparties, asset managers and industry associations.

This note summarises the comments made in the public consultation and sets out the main changes that have been made in  report to address them.

FSB and standard-setting bodies publish final report on effects of reforms on incentives to centrally clear over-the-counter derivatives

The Financial Stability Board (FSB), the Basel Committee on Banking Supervision (BCBS), the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) published today their final report on Incentives to centrally clear over-the-counter (OTC) derivatives.

The central clearing of standardised OTC derivatives is a pillar of the G20 Leaders’ commitment to reform OTC derivatives markets in response to the global financial crisis. A number of post-crisis reforms are, directly or indirectly, relevant to incentives to centrally clear. The report by the Derivatives Assessment Team (DAT) evaluates how these reforms interact and how they could affect incentives.

The findings of this evaluation report will inform relevant standard-setting bodies and, if warranted, could provide a basis for fine-tuning post-crisis reforms, bearing in mind the original objectives of the reforms. This does not imply a scaling back of those reforms or an undermining of members’ commitment to implement them.

The report, one of the first two evaluations under the FSB framework for the post-implementation evaluation of the effects of G20 financial regulatory reforms, confirms the findings of the consultative document that:

  • The changes observed in OTC derivatives markets are consistent with the G20 Leaders’ objective of promoting central clearing as part of mitigating systemic risk and making derivatives markets safer.

  • The relevant post-crisis reforms, in particular the capital, margin and clearing reforms, taken together, appear to create an overall incentive, at least for dealers and larger and more active clients, to centrally clear OTC derivatives.

  • Non-regulatory factors, such as market liquidity, counterparty credit risk management and netting efficiencies, are also important and can interact with regulatory factors to affect incentives to centrally clear.

  • Some categories of clients have less strong incentives to use central clearing, and may have a lower degree of access to central clearing.

  • The provision of client clearing services is concentrated in a relatively small number of bank-affiliated clearing firms and this concentration may have implications for financial stability.

  • Some aspects of regulatory reform may not incentivise provision of client clearing services.

The analysis suggests that, overall, the reforms are achieving their goals of promoting central clearing, especially for the most systemic market participants. This is consistent with the goal of reducing complexity and improving transparency and standardisation in the OTC derivatives markets. Beyond the systemic core of the derivatives network of central counterparties (CCPs), dealers/clearing service providers and larger, more active clients, the incentives are less strong.

The DAT’s work suggests that the treatment of initial margin in the leverage ratio can be a disincentive for banks to offer or expand client clearing services. Bearing in mind the original objectives of the reform, additional analysis would be useful to further assess these effects.

In this regard, the Basel Committee on Banking Supervision issued on 18 October a public consultation setting out options for adjusting, or not, the leverage ratio treatment of client cleared derivatives.

The report also discusses the effects of clearing mandates and margin requirements for non-centrally cleared derivatives (particularly initial margin) in supporting incentives to centrally clear; and the treatment of client cleared trades in the framework for global systemically important banks.

The final responsibility for deciding whether and how to amend a particular standard or policy remains with the body that is responsible for issuing that standard or policy.

The BCBS, CPMI, FSB and IOSCO today also published an overview of responses to the consultation on this evaluation, which summarises the issues raised in the public consultation launched in August and sets out the main changes that have been made in the report to address them. The individual responses to the public consultation are available on the FSB website.

Notes to editors

The five areas of post-crisis reforms to OTC derivatives markets agreed by the G20 are: trade reporting of OTC derivatives; central clearing of standardised OTC derivatives; exchange or electronic platform trading, where appropriate, of standardised OTC derivatives; higher capital requirements for non-centrally cleared derivatives; and initial and variation margin requirements for non-centrally cleared derivatives.

An earlier assessment of incentives to centrally clear OTC derivatives was published in 2014. In July 2017, the FSB published the Chairs’ Report on the Implementation of the Joint Workplan for Strengthening the Resilience, Recovery and Resolvability of Central Counterparties, which noted that a Derivatives Assessment Team would be convened to undertake a review of the incentives for central clearing arising from the interaction of post-crisis reforms, to be completed by end-2018. As part of that workplan, the FSB has also recently published a discussion paper for public consultation on the financial resources to support CCP resolution and the treatment of equity in resolution.

The FSB published in July 2017 a Framework for Post-Implementation Evaluation of the Effects of the G20 Financial Regulatory Reforms that guides analysis of whether the reforms are achieving their intended outcomes, and helps identify material unintended consequences that may have to be addressed, without compromising on the objectives of the reforms. The Framework provides the basis for dynamic implementation, and ensures that reforms remain fit for purpose amidst changing circumstances.

The evaluation on the effects of reforms on incentives to centrally clear OTC derivatives is one of the first evaluations under the Framework. The other initial evaluation under the Framework examines the effects of the G20 regulatory reforms on financial intermediation, covering the financing of infrastructure investment (to be published in the coming days) and of small and medium-sized enterprises (to be published in 2019). The FSB will also undertake an evaluation on the effects to date of reforms to end too-big-to-fail, which will be launched in early 2019 and completed in 2020.

Press enquiries BIS (CPMI/BCBS):

+41 61 280 8188

[email protected]

Press enquiries FSB:

+41 61 280 8138

[email protected]

Press enquiries IOSCO:

+ 34 91 787 0419

[email protected]

 

 

 

FSB publishes progress report on measures to address the decline in correspondent banking and updated data

16 November 2018

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Ref no: 43/2018

The Financial Stability Board (FSB) today published two reports on its work to assess and address the decline in correspondent banking relationships: (1) updated data on trends in correspondent banking relationships using data provided by SWIFT as of end-2017 and (2) a progress report on the FSB’s four-point action plan to assess and address the decline in correspondent banking that will be delivered to the G20 Summit.

The decline in the number of correspondent banking relationships in many countries around the world remains a source of concern for the international community because, in affected jurisdictions, it may impact the ability to send and receive international payments, or drive some payment flows underground, with potential adverse consequences on growth, financial inclusion and international trade. While impacts to the stability and integrity of the global financial system have not been identified, concerns remain at the national and regional level.

Alexander Karrer, Chair of the FSB’s Correspondent Banking Coordination Group and Deputy State Secretary at the Swiss Federal Department of Finance, said: “The international components of the FSB’s action plan are now largely in place. To be effective, these need to be implemented in practice by national authorities and banks. Despite the actions that have been taken, data from SWIFT shows that the decline in the number of active correspondents continued in 2017, affecting almost all regions. Payments were still flowing, but were concentrated in a smaller number of banks and in the most active corridors.”

FSB Correspondent banking data report – Update

The FSB correspondent banking data report shows that the decline in the number of active correspondents, as measured by the flow of SWIFT payment messages, continued in 2017, with a year-on-year reduction of 4.1%. All continents or sub-continents saw a decline in the number of active correspondents in 2017, with the rate of decline ranging between 5.2% and 6.7%, except in Northern America where it was 2.9%. From January 2011 to end-2017, the number of active correspondents declined globally by 15.5%.

The number of active corridors (defined as country pairs that processed at least one transaction) also declined in 2017, by 2.4%, and from January 2011 the data shows a decline of 7.3%.

Small economies with a Gross Domestic Product (GDP) of less than USD 10 billion have seen a stronger decline in the number of foreign counterparties per local banks (-23.4%), compared with economies with a GDP of between USD 10 billion and 1 trillion (approximately -18%) and economies with a GDP of above USD 1 trillion (-8.4%). The decline in small economies has not affected, on average, the total volume and value of payment messages they received; these have increased more for small economies compared to the larger economies.

Progress report

The progress report highlights the further actions taken to implement the FSB’s four-point action plan on correspondent banking since the FSB’s March 2018 update. These include:

  • Strengthening tools for due diligence by correspondent banks – The report notes the commitment of large banks to implement the Wolfsberg Group Correspondent Banking Due Diligence Questionnaire by end-2019. The FSB continues to encourage the industry to use the questionnaire to achieve greater efficiencies and improved standardisation in Know Your Customer utilities. Another important technical step is the recommendation by SWIFT to start the migration to the new ISO 20022 message format in correspondent banking in November 2021, which will support enhanced transparency, including through the use of the Legal Entity Identifier (LEI) for the unambiguous identification of originators and beneficiaries of cross-border payments. The recently launched FSB peer review on LEI implementation will help to identify and address any remaining obstacle to the effective use of the LEI in that field.

  • Clarifying regulatory expectations – The Financial Action Task Force (FATF) and Basel Committee on Banking Supervision (BCBS) have conducted surveys of their memberships to assess the transmission and traction of their guidance on correspondent banking. While there generally has been a high level of dissemination of the guidance, some national authorities may need to do more.

  • Domestic capacity building – The FSB recently held a workshop, involving both public and private sector participants, on the coordination and prioritisation of capacity development, including to strengthen domestic compliance with Anti-Money Laundering and Countering the Finance of Terrorism Public standards. The FSB is also exploring with the World Trade Organization, International Finance Corporation and multilateral development banks how solutions developed to address the reduction in correspondent banking relationships might also be used in the context of trade finance.

With the international components of the correspondent banking action plan largely in place, the FSB’s focus is now turning to monitoring, through its membership, of implementation and of developments. Access to correspondent banking relationships remains a critical issue in some regions and jurisdictions. Should the situation deteriorate further, the FSB, the relevant standard setting bodies and other stakeholders including international organisations and the private sector would consider whether further actions should be taken to address the issue.

The FSB, FATF, Global Partnership for Financial Inclusion (GPFI), IMF and World Bank are also monitoring the take-up of the FSB’s March 2018 recommendations on remittance service providers’ access to banking services and will report to the G20 in June 2019 on actions taken.

Notes to editors

The FSB launched its four-point action plan in November 2015 to assess and address the decline in correspondent banking. The plan covers:

  1. Further examining the dimensions and implications of the issue;

  2. Clarifying regulatory expectations, including guidance from FATF and BCBS;

  3. Domestic capacity-building in jurisdictions that are home to affected respondent banks; and

  4. Strengthening tools for due diligence in correspondent banks.

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 Mark Carney, Governor of the Bank of England. Its Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements.