The FSB, representing a broad and diverse membership of national authorities, international standard setters and international bodies, is actively cooperating to maintain financial stability during market stress related to COVID-19.

FSB COVID-19 work

Coordinated through the FSB, the official sector community is providing a rapid and coordinated response to support the real economy, maintain financial stability and minimise the risk of market fragmentation.

This response is underpinned by five principles:

  • to monitor and share information on a timely basis to assess and address financial stability risks from COVID-19;

  • to recognise and use the flexibility built into existing financial standards to support our response;

  • to seek opportunities to temporarily reduce operational burdens on firms and authorities;

  • to act consistently with international standards, and not roll back reforms or compromise the underlying objectives of existing international standards; and

  • to coordinate on the future timely unwinding of the temporary measures taken.

Based on these principles, the FSB’s COVID-19 work includes:

  • regularly sharing information on evolving financial stability threats and on the policy measures that financial authorities are taking;

  • assessing financial risks and vulnerabilities in the current environment; and

  • coordinating policy responses to maintain global financial stability, keep markets open and functioning, and preserve the financial system’s capacity to finance growth.

The FSB has re-prioritised its work programme for 2020 to focus on responding to the pandemic.

Information sharing

FSB members are taking a number of measures to ensure that the financial system is able to respond to the pandemic. Actions fall into five broad categories:

  1. Lending and credit support – including actions to ensure that financial institutions are able to continue lending, such as loan guarantee schemes, restructuring of loan terms, or the release of countercyclical capital buffers and encouragement to use capital and liquidity buffers.

  2. Funding and liquidity support – including actions by authorities to support funding markets in domestic currency, for instance through bank and market funding facilities or asset purchases, as well as facilities that provide access to foreign currency.

  3. Market functioning – steps by markets authorities to support the operations of markets, including enhanced market surveillance or volatility control mechanisms.

  4. Operational and business continuity of financial institutions – including engagement with financial institutions to ensure that they have robust measures in place so they can continue to maintain their activities.

  5. Authority business continuity measures – actions taken by authorities to ensure the continuity of their supervisory and regulatory activities.

The FSB report COVID-19 Pandemic: Financial Stability Implications and Policy Measures taken includes an overview of the types of measures taken by FSB member jurisdictions

Assessing financial risks and vulnerabilities

The COVID-19 pandemic represents the biggest test of the post-crisis financial system to date. The pandemic constitutes an unprecedented global macro-economic shock, pushing the global economy into a recession of uncertain magnitude and duration. The global financial system faces the dual challenge to sustain the flow of credit amidst declining growth and to manage heightened risks.

FSB members assess financial risks and vulnerabilities related to COVID-19 on an ongoing basis. Given the increased risks that the pandemic poses, the FSB is holding regular calls of its senior committees to discuss these risks and to share experiences of members on the steps they are taking to address them.

The FSB provided its assessment of financial stability risks related to COVID-19 in a report submitted to the 15 April 2020 virtual meeting of G20 Finance Ministers and Central Bank Governors.

The FSB is examining the potential financial stability risks that may lie ahead as the impact of COVID-19 on the global economy unfolds. Going forward, the FSB intends to monitor the resilience of the critical nodes discussed in the G20 report on a frequent basis, so as to identify any emerging issues in a timely manner. It also intends to identify and assess in a forward-looking manner the specific vulnerabilities that may materialise during this major global economic downturn, including potential sources of procyclicality.

From a medium-term perspective, the FSB also intends to examine how likely far-reaching changes in the global financial system associated with the COVID-19 crisis may affect the nature of financial stability risks.

Coordinating policy responses

FSB members, including the standard-setting bodies (SSBs), are cooperating closely to coordinate action, including financial policy responses in their jurisdictions, to maintain global financial stability, keep markets open and functioning, and preserve the financial system’s capacity to finance growth.

Many policy areas will be for individual national authorities or for sectoral standard-setters to consider. In cases where such requests have cross-border and cross-sectoral implications, a coordinated approach within the FSB to ease implementation expectations or to reaffirm existing implementation goals, will be sought.

SSBs are continuing to closely monitor developments and have all announced policy and operational measures aimed at supporting these goals. The FSB is actively coordinating with SSBs on issues that cut across sectors.

Guided by the five principles laid out above that underpin national and international regulatory and supervisory responses, the FSB and SSBs are:

  • sharing information on, and considering whether there are areas for collaboration to promote the effectiveness of, the steps authorities and the private sector are taking to temporarily mitigate lending terms for borrowers.

  • coordinating steps to support the business continuity of financial services firms, both through facilitating remote working and enabling those essential staff who need to work onsite to do so.

  • coordinating their responses to enable firms and authorities to focus their resources on COVID-19 response by delaying existing deadlines for implementation of international reforms and of other international regulatory initiatives, where this can be done in a way that remains consistent with the underlying objectives of the reforms.

Reprioritisation of the FSB work programme

The COVID-19 crisis calls for a reprioritisation of FSB initiatives to maximise the value of FSB work during the current crisis and to use members’ resources effectively.

The reprioritisation of FSB projects takes into account the following criteria:

  • whether the work is relevant to current crisis management;

  • whether the evolution of the crisis may substantially change the findings (and the analysis could therefore benefit from a delay);

  • whether there are other important reasons to maintain the existing timing and/or scope of the project; and

  • whether postponing or scaling back the work could relieve COVID-related additional resource pressures on FSB members and their staff and on financial institutions and other stakeholders.

The main elements of the reprioritisation are as follows:

  • Assessment of vulnerabilities. The FSB will focus on monitoring current risks to global financial stability, and in particular the impact of COVID-19 on the resilience of the financial system.

  • Non-bank financial intermediation (NBFI). Prioritisation will support timely discussion of policy issues arising from vulnerabilities in NBFI that are surfacing in the COVID-19 crisis, and decisions on how to organise such work in the FSB going forward.

  • Financial innovation. Prioritisation will ensure that key deliverables to the Saudi G20 Presidency will be provided, and that the FSB completes initiatives on topics that are likely to remain of policy relevance in the near term.

  • Cross-border payments. The three-stage work to develop a roadmap on cross-border payments, in coordination with the Committee on Payments and Market Infrastructures (CPMI), will continue as scheduled, given the importance of efficient cross-border payments systems.

  • Resolution. Technical work on central counterparty resolution and the implementation of the Total Loss-Absorbing Capacity standard remains a priority, given the importance as part of effective crisis management.

  • OTC derivatives. Finalising the oversight arrangements for Unique Product Identifier (UPI) and Unique Transactions Identifier will continue as the UPI service provider awaits clarity on the oversight arrangements.

  • Benchmark transition. The transition from LIBOR remains a priority as firms cannot rely on LIBOR being produced after end 2021. Benchmark transition will help to strengthen the global financial system.

  • Other work on supervisory and regulatory policies. FSB will prioritise work to focus on policy responses to the COVID-19 crisis, including forward-looking issues concerning crisis management.

  • Implementation monitoring. Implementation monitoring will track measures taken by SSBs in response to the COVID crisis. Other work will be reduced to the completion of near-final projects and the production of a streamlined annual report to the G20.

COVID-19 statements by the G20, FSB and standard-setting bodies