The Financial Stability Board (FSB) has issued a press release following its meeting in Cairns, in which it discussed vulnerabilities affecting the global financial system and reviewed work plans for completing core financial reforms.
The FSB notes that the core of the financial system continues to strengthen, with overall improvements in bank capital and liquidity, including in the euro area in advance of the results of the comprehensive assessment. However, the FSB has concerns including that there are increasing signs of complacency about risks in financial markets and that whilst market forces and regulatory reforms have reduced leverage in the banking system, leverage has picked up in other parts of the financial system, including in corporate debt markets.
The FSB also discussed progress with key post-crisis financial reforms including:
- ending too-big-to-fail. The FSB has made further substantial progress in defining the terms and conditions of total loss absorbing capacity for global systemically important banks and in finding solutions to remaining obstacles to cross-border resolution. In particular, the FSB has reviewed a report on the cross-border impacts and global financial stability implications of structural banking reforms being implemented or proposed in individual jurisdictions which will be published in October;
- shadow banking. The FSB will present an updated roadmap on shadow banking at the G20 Brisbane summit. In particular, the FSB has approved a revised regulatory framework on haircuts for non-centrally cleared securities financing transactions to limit the build-up of excessive leverage outside the banking system and help reduce pro-cyclicality;
- making derivatives markets safer. The FSB has conducted a feasibility study on approaches to global aggregation of over-the-counter derivatives data and will publish the report and recommendations shortly;
- foreign exchange benchmark reform. The FSB has approved the finalised recommendations for reforms to foreign exchange benchmark practices, which take into account the responses from an earlier public consultation. The report will be published by end-September; and
- accounting, auditing and disclosure. The FSB will hold a roundtable in 2014 for standard setters, supervisors and regulators, and other stakeholders to discuss how to further promote consistency of implementation.
View FSB plenary meets in Cairns, Australia, 18 September 2014