The Financial Stability Board (FSB) has released a letter from its Chair, Klaas Knot, addressed to G20 leaders ahead of their summit in Rio de Janeiro on November 18-19. The communication is accompanied by the FSB's Annual Report, which emphasizes uneven progress in implementing key G20 regulatory reforms and ongoing challenges. Klaas Knot calls for the "continued, full, consistent, and timely implementation of agreed-upon financial regulatory reforms."
The letter highlights vulnerabilities within the global financial system, referencing recent market turmoil and bank failures. It notes that the March 2023 banking issues highlighted risks of bank runs and emphasized the need for faster responses to deposit outflows. Enhancing non-bank financial sector resilience remains a priority for the FSB.
Knot's letter stresses effective implementation of FSB policies, stating that authorities must not only enact policies into national laws but also develop operational capacity. This message is reiterated in the accompanying 2024 Annual Report. The report tracks member jurisdictions' implementation of reforms like Basel III and non-bank financial intermediation (NBFI), noting uneven progress.
Digitalization is noted for its potential efficiencies in payment infrastructures. The FSB is developing policies for consistent regulation across payment providers, particularly concerning crypto-assets and cross-border payments. Additionally, the FSB has assessed artificial intelligence's impact on financial stability and plans to work with national authorities to monitor AI use.
Climate-related financial risks are increasingly evident globally, necessitating high-quality firm-level disclosures. The FSB supports global efforts to adopt disclosure standards issued by the International Sustainability Standards Board (ISSB). Progress has been made by around three-fourths of FSB member jurisdictions towards these standards.
Since 2015, annual reports have been published on G20 financial regulatory reforms' implementation and effects. In July 2024, a consultation report was issued with recommendations to strengthen consistency in regulating banks' and non-banks' cross-border payment services.
The FSB coordinates international efforts among national financial authorities and standard-setting bodies to promote effective regulatory policies for financial stability. It comprises national authorities from 24 countries and jurisdictions along with international institutions and regulators.
Klaas Knot chairs the FSB while serving as President of De Nederlandsche Bank. The Secretariat is based in Basel, Switzerland at the Bank for International Settlements.