The group discussed global and regional financial stability issues of particular relevance to Europe -including the FSB work to address risks arising from leverage in non-bank financial intermediation (NBFI) and from the outsourcing of critical services by financial institutions to third parties.
The Financial Stability Board (FSB) Regional Consultative Group for Europe met today in Madrid. The group discussed global and regional financial stability issues and other topics of particular relevance to Europe. This includes the FSB work to address risks arising from leverage in non-bank financial intermediation (NBFI) and from the outsourcing of critical services by financial institutions to third parties. Members also received an update on planned FSB work for 2024.
The banking sector turmoil in March highlighted the importance of effective resolution planning and execution. The FSB’s recently published report on lessons learnt for resolution from the 2023 bank failures identified several areas for further analysis and improvements in the operationalisation and implementation of the international resolution framework. Ahead of the meeting, the group held a roundtable, with invited academics, to discuss the role of deposit insurance and resolution frameworks, as well as how various tools can be brought together to enhance the resilience of the banking sector.
NBFI leverage has increased over the past decade, including through off-balance sheet exposures. Drawing on the recent FSB report that provides an overview of aggregate NBFI leverage trends, members discussed financial stability risks, as well as how vulnerabilities associated with that leverage could be monitored and addressed.
The FSB has developed a toolkit for financial institutions and financial authorities as well as service providers for their third-party risk management and oversight. Members shared their experiences of the oversight and management of financial institutions’ risks from outsourcing of critical services to third parties. The FSB will finalise its recommendations for its toolkit later this year.
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