FSB Urges Swift Reforms Amid Persistent Global Financial Vulnerabilities

The Financial Stability Board (FSB) has issued its Annual Report highlighting its efforts to bolster worldwide financial stability. Addressed to G20 Finance Ministers and Central Bank Governors ahead of their Marrakesh summit, the report reflects on the banking upheaval in March 2023. It underscores that prompt actions and existing Basel III reforms played a pivotal role in mitigating the impact of the crisis, yet it identifies areas for further strengthening the international resolution framework.

Global financial vulnerabilities remain high, marked by escalating financing costs and soaring debt levels across governmental, corporate, and household sectors. Elevated interest rates and an uncertain growth outlook heighten the risk of asset price volatility. Moreover, the emergence of vulnerabilities from structural changes in climate, cyber, and crypto-asset markets adds to the concerns.

To counter these challenges, the FSB delineates ongoing initiatives, encompassing the fortification of non-bank financial intermediation, enhancement of cross-border payments, resolution improvements for central counterparties, mitigation of financial risks associated with climate change, and the finalization of a global regulatory framework for crypto-assets.

While progress in implementing G20 financial regulatory reforms is evident, the report underscores uneven advancements. Jurisdictions affiliated with the FSB are gradually implementing Basel III reforms, albeit with some delays extending to 2024 or beyond. Efforts to reinforce resolution plans for banks, insurers, and central counterparties are ongoing. Notably, reforms for non-bank financial intermediaries are at an earlier stage and progressing at a slower pace compared to other areas of reform.

Underlining the significance of global regulatory collaboration, the report stresses the imperative of completing the post-crisis reform agenda with G20 support. The FSB and standard-setting bodies pledge to continue advocating for strategies that foster international cooperation, coordination, and the exchange of information.