Sunday, 16 June 2024

FSB Americas Group discusses bank failures and regional vulnerabilities

5 min read

The Financial Stability Board (FSB) Regional Consultative Group (RCG) for the Americas met in Lima, Peru over the past two days in a meeting hosted by the Central Reserve Bank of Peru and the Superintendency of Banking, Insurance and Private Pension Fund Administrators of Peru.

The global financial system is facing a higher interest rate environment, against a backdrop of high public and private sector debt levels. The group discussed global and regional macro-financial vulnerabilities, including tighter financing conditions and implications for exchange rates. Members exchanged views on links between the sovereign and banking sectors and discussed whether such interconnections could pose systemic risk.

The higher interest-rate environment could also amplify vulnerabilities in non-bank financial intermediation (NBFI). Members stressed the importance of monitoring NBFI and putting in place mechanisms to mitigate the financial stability risk of high NBFI leverage.

The banking sector turmoil in March highlighted the importance of effective resolution planning and execution. Members discussed developments in banking supervision and crisis management in their jurisdictions. The group discussed the FSB’s recently published report on lessons learnt for resolution from the 2023 bank failures and exchanged views on relevant policy considerations to ensure a more resilient banking sector and effective resolution frameworks. Members look forward to further work into these preliminary lessons learned, as part of the FSB’s planned work for 2024.

The implications for financial stability from climate change remains a key priority for financial authorities in the region. Members discussed the impact of extreme weather events and climate change on the costs and availability of residential and commercial property insurance. Members also discussed the role of global reinsurance in providing insurance against climate-related catastrophe losses.

Members received an update on planned FSB work for 2024. The group discussed ways they could contribute to the FSB’s work programme to bring in additional perspectives from the region.

 

Re-disseminated by The Asian Banker

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