Sunday, 25 February 2024

FSB reports efforts to address global financial vulnerabilities

5 min read

The Financial Stability Board (FSB) published its Annual Report which highlights the organisation's work in promoting global financial stability. The report was delivered to G20 Finance Ministers and Central Bank Governors before their Marrakesh meeting.

The report looks back at the banking turmoil in March 2023. It notes that swift and decisive actions were taken by the relevant authorities and that the already implemented Basel III reforms helped shield the global banking sector and real economy from a more severe banking crisis. The FSB’s review concludes that these events demonstrate the soundness of the international resolution framework but identify several areas to enhance its implementation.

Vulnerabilities in the global financial system continue to be elevated. The cost of financing has risen substantially, at a time when debt is at very high levels across the government, corporate and household sectors. High-interest rates and an uncertain growth outlook also create the potential for higher volatility in asset prices. Meanwhile, vulnerabilities from structural change continue to emerge in areas such as climate change, cyber and crypto-asset markets.

The report outlines the work the FSB is doing to address these vulnerabilities. This includes work to enhance resilience in non-bank financial intermediation (NBFI); improve cross-border payments; enhance the resolution of central counterparties (CCP); address financial risks from climate change; and finalise a global regulatory framework for crypto-asset activities.

The report finds that progress in implementing the G20 financial regulatory reforms continues but remains uneven. FSB member jurisdictions continue to implement the finalised Basel III reforms, though implementation in many cases is being pushed to 2024 or later. Work is still ongoing to close gaps in the operationalisation of resolution plans for banks and to implement effective resolution regimes for insurers and CCP. The report notes that implementation of NBFI reforms continues at a slow pace and is at an earlier stage than other reform areas.

The report emphasises that developments over the past year reinforce the importance of global regulatory cooperation, including the completion of the post-crisis reform agenda with G20 support. The FSB and standard-setting bodies will continue to promote approaches to deepen international cooperation, coordination and information sharing.

Re-disseminated by The Asian Banker

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