On 13 October 2019, the Financial Stability Board (FSB) published a letter from Randal Quarles, FSB Chair, to G20 Finance Ministers and Central Bank Governors.

The letter highlights three areas of the FSB’s work:

  • ensuring resilience in the face of new risks. The outlook for global growth has started to weaken and become more uncertain. The long period of sustained global growth and rising asset prices may have weakened the incentives to take precautions against unforeseen events. The FSB is developing a new surveillance framework for the assessment of vulnerabilities which will be in place by next year. The FSB is also conducting an in-depth analysis of the markets for leveraged loans and collateralized loan obligations. A summary of this study is expected by the end of this year. The FSB is also assessing the financial stability implications of structural changes in the financial system, including non-bank finance and technological innovation;
  • potential financial stability issues from global stablecoins. Stablecoin projects of potentially global reach and magnitude must meet the highest regulatory standards and be subject to prudential supervision and oversight. The G7 working group on stablecoins is delivering a preliminary assessment of opportunities and challenges posed by global stablecoins. The G7 working group will be handing off work on regulatory issues to the FSB. The FSB is submitting an issues note on global stablecoins to the October 2019 G20 Finance Ministers and Central Bank Governors meeting. The FSB will submit a consultative report to the G20 Finance Ministers and Central Bank Governors in April 2020, and a final report in July 2020; and
  • promoting a financial system that supports strong and sustainable global growth. Following its June report on addressing instances of harmful market fragmentation the FSB has submitted a progress report to the G20 on its further work in this area. The FSB is also taking forward its multi-year programme of rigorous evaluation of post-crisis reforms. The FSB states that the evaluation of the effects of those reforms on small and medium-sized enterprises, is nearing completion, while the evaluation of the effects of too-big-to fail reforms for banks is underway.

The letter notes that the development of post-crisis reform policies is nearly complete and implementation is well underway, however, it emphasises that the FSB’s mission is far from complete. The FSB explains that implementation progress on agreed G20 reforms remains uneven across key reform areas, and it is in the process of evaluating that reforms are working as intended. Going forward, the FSB urges authorities to prepare to address evolving risks to global financial stability, whether they are related to current downside risks to growth and uncertainties around Brexit, or structural changes in the financial system.