FSB MENA Deliberates on Regional Finance and Cross-Border Payments

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In a recent meeting, the Financial Stability Board’s regional consultative group for the Middle East and North Africa (RCG MENA) delved into a comprehensive examination of global and regional macroeconomic and financial stability developments. While the spillovers from bank failures in the US and Europe in March remained subdued, the group expressed concerns about the growing influence of geopolitical factors on the economic outlook. Additionally, the discussion highlighted the escalating macro-financial risks associated with a sustained period of higher interest rates.

Global Macro-Financial Landscape

The aftermath of bank failures in the US and Europe, which occurred in March, was a focal point of the discussion. Despite the muted spillover effects in the MENA region, geopolitical considerations emerged as a significant determinant of the economic landscape. The participants emphasized the need for vigilant monitoring of these geopolitical factors and their potential impact on financial stability.

Rising Risks in a Higher Interest Rate Environment

As global interest rates trend higher, the RCG MENA explored the resulting vulnerabilities in non-bank financial intermediation (NBFI). The discussion revolved around the implications of an enduring higher-for-longer interest rate environment. Participants analyzed the potential challenges and risks associated with this shift, acknowledging the importance of adapting financial systems to ensure resilience in the face of changing interest rate dynamics.

Cross-Border Payments and Financial Inclusion

An integral part of the meeting was a detailed examination of cross-border payments and their significance in the evolving financial landscape. The FSB, under the coordination of the G20 Roadmap, is actively working on enhancing cross-border payment mechanisms. The group considered the progress report published by the FSB in October, emphasizing the need for continued efforts to meet the quantitative targets by 2027. Members shared regional initiatives aimed at strengthening payment arrangements and fostering financial inclusion.

Work Programme for 2024

The RCG MENA received updates on the FSB’s work programme for 2024, outlining key areas of focus. The ongoing assessment of lessons learned from the March turmoil remained a priority. With a keen eye on macro-financial vulnerabilities in the wake of rising interest rates, the FSB aims to proactively address potential challenges. The group explored collaborative ways to contribute to the FSB’s work programme, emphasizing four key areas: advancing the regulatory framework for crypto-asset markets, enhancing cross-border payments, addressing post-March turmoil considerations, and fortifying cyber and operational resilience.

Regional Perspectives and Collaborative Initiatives

Participants actively discussed ways to bring unique regional perspectives to the FSB’s initiatives. A concerted effort was directed towards advancing the global regulatory and supervisory framework for crypto-asset markets, recognizing the evolving nature of these financial instruments. Strengthening cross-border payments, post-March turmoil analysis, and bolstering cyber and operational resilience emerged as shared priorities for the MENA region.

In conclusion, the meeting underscored the importance of ongoing collaboration in navigating the complex financial landscape, with a focus on proactive measures to address emerging challenges and fortify financial systems in the MENA region.