23 May 2023

FSB Europe Group discusses risks to financial stability, including recent banking sector stress, DeFi and climate change

The Financial Stability Board (FSB) Regional Consultative Group for Europe met today in London. The group discussed global and regional financial market developments and financial stability risks arising from decentralised finance (DeFi) and from climate change.

Members discussed the challenging outlook for financial stability, including recent stress in the banking sector. Members noted the work currently being undertaken by national authorities and standard-setting bodies to examine and learn lessons from events in the banking sector. Members received an update on the FSB’s work programme, including deliverables to the Indian G20 Presidency, and discussed potential FSB work on lessons learned following recent events.

In July, the FSB will finalise its recommendations for the regulation, supervision and oversight of crypto-assets and markets and its revised recommendations specifically addressing global stablecoin arrangements. The FSB is also analysing the financial stability implications of developments in the DeFi area (although the actual level of decentralisation varies widely). The group discussed risks arising from DeFi, which has emerged as a fast-growing segment of the crypto-asset ecosystem, and implications for regulatory and supervisory policies.

The group also discussed the role of climate scenario analysis in the assessment, supervision and regulation of climate-related financial risks and the links with transition planning. Drawing on the findings of the FSB’s joint report with the Network for Greening the Financial System (NGFS) published in November 2022, members discussed data, approaches and instruments that could help in building an effective climate scenario analysis toolkit.

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