At its meeting, the Financial Stability Board (FSB) discussed vulnerabilities affecting the global financial system and progress in authorities' work to strengthen global financial regulation.
Despite important progress in strengthening the resilience of the global financial system, some parts of the system remain in a state of incomplete repair. Some jurisdictions need to continue to improve the capitalisation of their banking systems. The balance sheet assessment to be undertaken by the ECB later this year in preparation for the single supervisory mechanism, together with clarity on the availability of adequate capital backstops, will be important to strengthen the eurozone banking system. In other parts of the world where credit growth has been very rapid over recent years, building further resilience remains a priority.
The FSB approved for public release a set of guidance papers to support the recovery and resolution planning process for systemically important financial institutions. The guidance covers the development of effective resolution strategies, stress scenarios and recovery triggers, and the identification of critical functions.
The FSB also reviewed Annexes to be added to the FSB Key Attributes of Effective Resolution Regimes on the resolution of financial market infrastructures, the resolution of systemic insurance groups, the protection of client and custody assets in resolution and information sharing among relevant authorities for resolution purposes. These will be issued for public consultation later this summer.
The FSB discussed progress in the implementation of reforms to OTC derivatives markets. Given the highly international nature of these markets, members stressed the importance and urgency of resolving remaining issues arising from the cross-border application of rules, including to bridge remaining differences between jurisdictions’ rules and implementation timetables, ahead of the G20 Summit in early September.
The FSB agreed that global aggregation of trade repository data is essential to enable comprehensive monitoring of risks to financial stability, and launched a feasibility study of options for how information from trade repositories can be aggregated and shared among authorities. The results of the study will be published in the first half of 2014. The FSB welcomed the progress made by BCBS/IOSCO in developing final international standards for margining requirements for non-centrally cleared derivatives trades and capital requirements relating to exposures to central counterparties. The FSB discussed an interim assessment of the macro-economic impact of global OTC derivatives reforms and will publish a final version later this year.
The FSB will submit to the G20 Summit an update on jurisdictions’ progress to date in putting in place regulations and their committed timelines for completing remaining reforms.
The FSB decided to establish an Official Sector Steering Group of regulators and central banks to coordinate consistency of reviews of existing interest rate benchmarks. The Group will also convene and guide the work of a Market Participants Group which will review options for robust reference rates that meet the needs of the private sector, and any potential transition issues. The Steering Group will examine whether the governance and processes around these benchmarks meet agreed international standards, including those being developed by IOSCO. The Group will be broadly representative of the national or regional authorities that are home to each major reference rate. It will be chaired by Martin Wheatley, Managing Director of the UK Financial Conduct Authority, and Jeremy Stein, Governor of the US Federal Reserve Board.
Full press release
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