Financial Stability Board
|Predecessor||Financial Stability Forum|
The Financial Stability Board (FSB) is an international body that monitors and makes recommendations about the global financial system. It was established after the 2009 G20 London summit in April 2009 as a successor to the Financial Stability Forum (FSF). The Board includes all G20 major economies, FSF members, and the European Commission. It is based in Basel, Switzerland.
The Financial Stability Board emerged from the Financial Stability Forum (FSF), a group of finance ministries, central bankers, and international financial bodies. The FSF was founded in 1999 to promote international financial stability, after discussions among Finance Ministers and Central Bank Governors of the G7 countries, and a study which they commissioned. The FSF facilitated discussion and co-operation on supervision and surveillance of financial institutions, transactions, and events. FSF was managed by a small secretariat housed at the Bank for International Settlements in Basel, Switzerland. The FSF membership included about a dozen nations who participate through their central banks, financial ministries and departments, and securities regulators, including: the United States, Japan, Germany, the United Kingdom, France, Italy, Canada, Australia, the Netherlands and several other industrialized economies as well as several international economic organizations. At the G20 summit on November 15, 2008 it was agreed that the membership of the FSF will be expanded to include emerging economies, such as China. The 2009 G-20 London summit decided to establish a successor to the FSF, the Financial Stability Board. The FSB includes members of the G20 who were not members of FSF.
The Financial Stability Forum met in Rome on 28–29 March 2008 in connection with the Bank for International Settlements. Members discussed current challenges in financial markets, and various policy options to address them from this point forward. At this meeting, the FSF discussed a report to be delivered to G7 Finance Ministers and Central Bank Governors in April 2008. The report identifies key weaknesses underlying current financial turmoil, and recommends actions to improve market and institutional resilience. The FSF discussed work underway at the International Monetary Fund (IMF) and Organisation for Economic Co-operation and Development (OECD) with regard to sovereign wealth funds (SWFs). The IMF is working closely with SWFs to identify a set of voluntary best practice guidelines, and is focusing on the governance, institutional arrangements and transparency of SWFs. On April 12, 2008 the FSF delivered a report to the G7 Finance Ministers which details its recommendations for enhancing the resilience of financial markets and financial institutions. These recommendations cover five areas of financial oversight:
- Strengthened prudential oversight of capital, liquidity and risk management;
- Enhancing transparency and valuation;
- Changes in the role and uses of credit ratings;
- Strengthening the authorities' responsiveness to risks; and
- Robust arrangements for dealing with stress in the financial system.
Pre crisis publications
FSB published guidlines for how banks should formulate their Risk appetite in November 2013.
Post crisis reforms
In July 2016, after the world markets had faced a number of crises, including terrorism and the UK's decision to leave the European Union, Carney sent a letter (late July 2016) to Finance Ministers attending the G20 Summit and to Central Bank Governors outlining the reforms the FSB had made indicating that the global economy and financial system had "continued to function effectively" and had "weathered" the "spikes in uncertainty and risk aversion", confirming that "this resilience in the face of stress demonstrates the enduring benefits of G20 post-crisis reforms." He emphasized the value of specific reforms that had been implemented by the Financial Stability Board stating that these had "dampened aftershocks from these events [world crises] rather than amplifying them". He expressed confidence in the FSB's strategies: "This resilience in the face of stress demonstrates the enduring benefits of G20 post-crisis reforms."
The FSB published the pre-G20 Summit letter in light of the "two spikes in uncertainty and risk aversion" weathered by the global economy and financial system as of late July 2016, which outlined its priorities for 2016:
i.Promoting a coordinated programme of reforms to deliver resilient sources of market-based finance, including addressing structural vulnerabilities associated with asset management activities; ii.Developing robust financial market infrastructure, including assessing policies on central counterparty resilience, recovery and resolvability, and recommending any necessary improvements; and iii.Supporting effective macroprudential arrangements, by drawing lessons from national experiences of the practical application of macroprudential policy frameworks and tools working in partnership with the International Monetary Fund and Bank for International Settlements.
In addition to the priorities listed above, the FSB was also:
i.Pursuing the full and consistent implementation of post-crisis reforms, while addressing material unintended consequences; ii.Addressing new and emerging vulnerabilities in the financial system, including those associated with conduct, correspondent banking and climate change; and iii.Monitoring the potentially systemic implications of financial technology innovations, and the systemic risks arising from operational disruptions.
The FSB represents the G-20 leaders' first major international institutional innovation. Secretary of the US Treasury Tim Geithner has described it as "in effect, a fourth pillar" of the architecture of global economic governance. The FSB has been assigned a number of important tasks, working alongside the IMF, World Bank, and WTO. Chairman of the board is the Canadian Mark Carney, Governor of the Bank of England.
The following countries and organizations are listed as members of the FSB:
- Bank for International Settlements
- European Central Bank
- European Commission
- International Monetary Fund
- Organisation for Economic Co-operation and Development
- The World Bank
Chairmen of the FSB
- Mario Draghi 2009-2011 - President of the European Central Bank and former Governor of the Bank of Italy
- Mark Carney 2011-present - Governor of the Bank of England and former Governor of the Bank of Canada
- Principles for An Effective Risk Appetite Framework
- Financial Stability Board
- April 2008 "Report of the Financial Stability Forum on Enhancing Market and Institutional Resilience"
- List of FSF press releases, at BIS website.
- Financial Stability Board Watch
- Brookings Institution report "The Governance of the Financial Stability Board"
- Gabriele Steinhauser (31 March 2016). "Regulators Examine Financial Risks of Climate Change". WSJ.
- "Genesis of the FSF". Financial Stability Forum. Archived from the original on 14 June 2008. Retrieved 30 April 2016.
- "Home/News". Financial Stability Forum. Archived from the original on 12 May 2009. Retrieved 30 April 2016.
- "Who we are". Financial Stability Forum. Archived from the original on 14 June 2008. Retrieved 30 April 2016.
- "Financial Stability Forum decides to broaden its membership" (PDF). Financial Stability Forum. 12 March 2009. Archived from the original on 11 April 2009. Retrieved 30 April 2016.
- "Press release: Financial Stability Forum meets in Rome".
- "Press release: Financial Stability Forum Recommends Actions to Enhance Market and Institutional Resilience".
- "FSB Chair updates G20 Finance Ministers and Central Bank Governors on progress in advancing the FSB’s 2016 priorities". The Asian Banker. The Asian Banker. 24 July 2016. Retrieved 25 July 2016.
The letter outlines the progress the FSB is making in advancing its priorities for 2016
- Szu, Ping Chan (24 July 2016). "G20: Chancellor eyes clarity on Brexit deal 'later this year' as vote raises global risks". The Telegraph. London, UK. Retrieved 25 July 2016.
- "FSB Chair updates G20 Finance Ministers and Central Bank Governors on progress in advancing the FSB’s 2016 priorities". FSB. FSB. 24 July 2016. Retrieved 25 July 2016.
- "Mark Carney gets chance to reshape Bank of England after departure of deputy governor". Financial Post. 13 June 2013. Retrieved 20 June 2013.
- "Links to FSB members". Financial Stability Board. Retrieved 17 November 2011.