25 May 2024

G7 Finance Ministers and Central Bank Governors’ Communiqué, Stresa, 23-25 May 2024

...a continued focus on financial stability and regulatory issues remains vital to ensure the effective functioning of the financial system... the importance of work carried out by the FSB and the Standard-Setting Bodies (SSBs) to identify and monitor vulnerabilities in the financial system...

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Financial Sector Issues
9. Given a range of risks to the global outlook, we reiterate that a continued focus on financial stability and regulatory issues remains vital to ensure the effective functioning of the financial system. We underline the importance of work carried out by the FSB and the Standard-Setting Bodies (SSBs) to identify and monitor vulnerabilities in the financial system and develop policies to address them.
10. We strongly support the FSB’s ongoing work to enhance the resilience of the non-bank financial intermediation (NBFI) sector by addressing vulnerabilities associated with liquidity mismatches, leverage, pro-cyclicality, and interconnectedness. This work is aimed at mitigating potential systemic risks stemming from the NBFI sector which may trigger or amplify adverse shocks, cause contagion, and eventually jeopardise its ability to provide sustainable financing to the economy. We welcome the recent publication of the FSB Revised Policy Recommendations to Address Structural Vulnerabilities from Liquidity Mismatch in Open-Ended Funds (OEFs). The recommendations aim to strengthen liquidity management by OEF managers by providing greater clarity on the redemption terms they can offer to investors based on the liquidity of their asset holdings, and to achieve greater and more consistent use of liquidity management tools (LMTs). We commit to implementing such recommendations, together with International Organization of Securities Commissions’ guidance on anti-dilution LMTs. We also welcome the FSB Thematic Review on Money Market Fund (MMF) Reforms. We reiterate the need to adopt policies, if not already done so, in line with the agreed FSB framework and toolkit to ensure resilience of MMF. We look forward to the finalisation of the FSB proposals to strengthen liquidity preparedness for margin and collateral calls and the SSB’s related proposals. We encourage ongoing FSB efforts aimed at improving the information and data available to authorities and market participants for monitoring leverage and calibrating policies to address the related risks.
11. We remain committed to strengthening cyber resilience in the financial sector, also against the background of heightening geopolitical tensions and in the context of hybrid threats. Cyber threats are evolving rapidly and becoming increasingly sophisticated. Emerging technologies, like Artificial Intelligence (AI) and quantum computing, provide new opportunities but also pose new challenges that are not yet fully understood. Besides regulation and supervision, it is crucial to promote sound cooperation and information sharing among relevant public and private stakeholders. Adoption of guidelines, deeper analysis of emerging risks, and cyber exercises are important building blocks of an effective strategy and should also inform the international coordination of responses and sharing of key information. In this respect, we welcome the successful completion of the cross-border coordination exercise that the G7 Cyber Expert Group (G7 CEG) conducted on 16 and 17 April 2024, and we ask the G7 CEG to further advance its work to improve the financial sector's preparedness and response capacity to cyber threats.
12. As G7 Members, we welcome initiatives to take forward the G20 Roadmap to enhance cross-border payments that aim to contribute to faster, cheaper, more transparent, and more inclusive cross-border payments, while maintaining their safety, resilience, and financial integrity. Improving cross-border payments should benefit both advanced
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economies and emerging markets and developing economies (EMDEs), contribute to financial integration, and counter the risk of market fragmentation. A variety of technological solutions to improve payment system infrastructure and arrangements are emerging that differ in terms of technical and design features, and in the degree of involvement of the public and private sectors. The G7 supports responsible innovation that enables interoperability among new and existing cross-border payment systems. We emphasise that such solutions should embed widely shared values of the International Monetary and Financial System, including appropriate transparency, the rule of law and sound economic governance. They should also support a level playing field for private sector competition and innovation, and the observance of relevant international standards, such as the Principles for Financial Market Infrastructures and FATF Standards on combating money laundering and terrorist financing, as well as the financing of proliferation of weapons of mass destruction. Hence, we look forward to further discussions to explore and promote such solutions and aim to support technical assistance and capacity building for the development of fast payment systems, while making progress towards connecting them, as appropriate, as they continue to develop and gain momentum. We also reaffirm our support for international cooperation within the G7 and beyond, in particular with EMDEs through the G20 Roadmap. In this context, we strongly support ongoing work by the CPMI, including a report on governance and oversight of fast payment systems interlinking arrangements, and look forward to the FSB recommendations to reduce frictions resulting from differences in frameworks for data related to cross-border payments, which will be critical to meet the quantitative targets under the G20 Roadmap.
13. The safety, efficiency and integrity of payment system are key foundations. In light of increasing demand from EMDEs for policy guidance and capacity development, we welcome the IMF’s work on the “CBDC Handbook” which will help EMDEs consider the potential risks, costs, and benefits of CBDCs in the context of other payment innovations. We encourage the IMF to continue to develop and update the chapters of the handbook to incorporate the latest findings.
14. We reiterate the importance of stepping up global efforts to combat money-laundering, terrorist financing and proliferation financing, as well as our commitment to supporting the FATF and its Regional Bodies in overseeing the implementation of the FATF standards across the global network, including in the next round of mutual evaluations. We also support the FATF's initiatives on accelerating global implementation of its standards on virtual assets, including the recent publication of the implementation status table, and its work on emerging risks, including from DeFi arrangements and peer-to-peer transactions. We reaffirm our support for the G20 Roadmap on Crypto Assets and our commitment to implement effective regulatory and supervisory frameworks consistent with the FSB’s recommendations and standards and guidance established by SSBs. In addition, we commit to the timely and effective implementation of the revised FATF standards on the transparency of beneficial ownership of legal persons and legal arrangements and on asset recovery. We also support the G20 Global Partnership for Financial Inclusion in its work for advancing financial inclusion of individuals and Micro-, Small-, and Medium- Enterprises.

 

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