On 20 February 2023, the Financial Stability Board (FSB) published a letter from its Chair, Klaas Knot, to G20 Finance Ministers and Central Bank Governors, ahead of the G20 meeting on 24-25 February.

The letter notes the recent easing in global financial conditions but warns that, while expectations of a ‘soft landing’ for the global economy have grown, the outlook remains clouded by uncertainty.

The letter lays out the FSB’s work during 2023 to monitor and address these vulnerabilities and introduces three reports the FSB is delivering to this meeting on:

  • Non-bank financial intermediation (NBFI) – The FSB report on the financial stability aspects of commodity markets identifies a number of vulnerabilities in commodity markets, such as concentration of activities and widespread use of leverage. Many of the vulnerabilities and channels of contagion analysed in the report are being addressed in the FSB’s work programme to enhance the resilience of NBFI.
  • Crypto-assets and decentralised finance –The report on the financial stability risks of decentralised finance (DeFi) points to the fact that DeFi does not differ substantially from traditional finance in the functions it performs. DeFi inherits and may amplify the vulnerabilities of that system. Building on this work, the FSB will explore approaches to fill data gaps for risk monitoring and examine the extent to which its proposed crypto-asset policy recommendations may need to be enhanced to cover DeFi-specific risks. The FSB will finalise by July this year its recommendations for the regulation, supervision and oversight of crypto-assets and markets and its recommendations targeted at global stablecoins.
  • Cross border payments – The FSB will publish a report later this week on implementation of the G20 Roadmap to enhance cross-border payments, a detailed set of next steps to achieve the Roadmap’s goals, which will be accompanied by the establishment of two new taskforces to strengthen private sector participation in taking the Roadmap forward.