FSB holds Frankfurt plenary

The FSB Plenary met in Frankfurt to discuss preliminary lessons learned from the recent banking sector turmoil and the outlook for global financial stability. The Plenary also agreed its deliverables to the July G20 Finance Ministers and Central Bank Governors meeting.

Preliminary lessons learnt from recent banking turmoil

The Plenary recalled recent events in the banking sector in Q1 2023 as the first real test of the international resolution framework since the 2008 global financial crisis. The FSB’s work programme has been reprioritised, with an additional focus on interactions between interest rate and liquidity risk, the role of technology and social media in deposit runs.

The FSB plans an in-depth review on lessons learned for the resolution of G-SIBs and systemically important banks more broadly. It will explore effective public backstop arrangements; optionality in implementation of resolution strategies; the scope of resolution planning and loss-absorbing capacity requirements; the impact of digital innovation on resolution preparedness; and the role of deposit insurance in resolution arrangements. A report is expected by the end of the year.

A report on the FSB’s peer review on the implementation of the too-big-to-fail reforms in Switzerland is expected early in 2024. It is also set to deliver reports to the G20 in September on financial stability risks of leverage in the non-bank sector and on its programme to enhance NBFI resilience.

FSB roadmap for addressing financial risks from climate change

Following the delivery of the FSB’s Task Force on Climate-related Financial Disclosures (TCFD) annual status report in September, the FSB asks the IFRS Foundation to take over the monitoring of progress on companies’ climate-related disclosures from the TCFD as of next year. The FSB will deliver to the July G20 an updated roadmap of progress made across a range of SSB and international organisations on climate-related financial risks.

Crypto-asset activities and markets

The Plenary also approved the FSB crypto-asset and stablecoin recommendations, which establish a global regulatory framework to promote the comprehensiveness and consistency of approaches to both types of asset, and will also be submitted to the July G20 for endorsement,

The finalised high-level recommendations have been strengthened from the October 2022 consultation proposals to address vulnerabilities revealed by the failures of large crypto-asset intermediaries and other service providers. Members discussed ways to promote multi-jurisdictional implementation, including in jurisdictions beyond the FSB’s membership, to mitigate the risks of crypto-asset activities and markets flowing to areas where regulation is less stringent.

Laura Wiles