The letter describes the FSB’s work to address issues of financial innovation and technology, promote a resilient and integrated global financial system, and address market fragmentation.
The FSB (Financial Stability Board) has published a letter from Chairman Randal Quarles to the G20 Finance Ministers and Central Bank Governors ahead of their virtual meeting today.
The letter notes the extraordinary challenges for the global financial system this year, and that the FSB will provide a comprehensive report on the financial stability implications of, and policy responses to, “the COVID Event” to the November G20 Summit. This will include a holistic review of the market turmoil in March, which will inform the FSB’s future steps under the Italian G20 Presidency to improve the resiliency of the NBFI sector.
“Meanwhile, we have not lost sight of important ongoing work in financial innovation, payments systems, cyber resilience, and market fragmentation,” the letter says. “The pace of technological advancements and innovation has not slowed down with the COVID Event, and experience suggests that such significant events often spur rapid innovation in their wake.”
The letter points to work the FSB is submitting to the G20 addressing issues at the frontier of financial innovation and technology, including a toolkit of effective practices for cyber incident response and recovery; an examination of the impact that BigTech firms in finance; an assessment of the use of SupTech and RegTech; and high-level recommendations for regulating stablecoins.
The letter also describes the FSB’s high-level roadmap for developing cross-border payment systems and processes that are faster, more inclusive, less expensive, and more transparent. “While the actions that form the overall roadmap are ambitious, they are achievable with continued support from the G20,” the letter says.
In addition, the letter says the FSB is continuing to work on a variety of fronts to promote a resilient and integrated global financial system. In particular, it highlighted a consultation on too-big-to-fail reforms that we delivered to, saying the evaluation has found that banks are now more resilient and resolvable. A final report will be issued in early 2021.
In addition, the FSB points to its analysis of the channels through which climate-related risks might affect financial stability, noting that the TCFD (Task Force on Climate-related Financial Disclosures) will shortly publish its third status report in November showing “significant momentum” around adoption of and support for the 2017 recommendations, while also highlighting challenges to more consistent and robust implementation.
The FSB also continues to coordinate work to support LIBOR transition, and is developing a global transition roadmap, intended to raise awareness of the steps firms should be taking now and over the remaining period to end-2021 to successfully achieve the transition.
Finally, an update on efforts to address market fragmentation is being provided, covering the four areas of work identified in the FSB’s 2019 report on market fragmentation.
The full list of reports delivered to the G20 meeting include:
- FSB Chair’s letter to G20 Finance Ministers and Central Bank Governors [read in full]
- Effective Practices for Cyber Incident Response and Recovery
- BigTech Firms in Finance in Emerging Market and Developing Economies [read more]
- The Use of Supervisory and Regulatory Technology (SupTech and RegTech) by Authorities and Regulated Institutions [read more]
- Regulatory Issues in Regulation, Supervision and Oversight of “Global Stablecoin” Arrangements [read more]
- G20 Roadmap on Enhancing Cross-Border Payments [read more]
- Market Fragmentation: Updates on Ongoing Work [read more]
- FSB/IMF Fifth Progress Report on G20 Data Gaps Initiative (DGI-2) [read more]
“Our deliverables aim to provide the regulatory community with additional tools to quickly assess and mitigate the risks posed by such changes without tempering the benefits,” the letter says.