Incomplete implementation of financial reforms continues to expose the global financial system to potential shocks, according to Andrew Bailey, Chair of the Financial Stability Board (FSB). In a letter addressed to G20 Finance Ministers and Central Bank Governors ahead of their meeting on October 15-16, Bailey emphasized the need for multilateral cooperation and the consistent application of reforms amid heightened risks and uncertainty.
Bailey stated, "The rapid evolution of the financial sector calls for enhanced surveillance of emerging risks." He highlighted that an interim report from the FSB’s strategic review shows that full, timely, and consistent implementation of G20 reforms has not been achieved. This gap leaves the financial system vulnerable.
The letter is accompanied by an interim report from the G20 strategic review of FSB implementation monitoring work. The review is led by Randal K. Quarles, former FSB Chair. The findings indicate that despite ongoing monitoring efforts by the FSB and standard-setting bodies, inconsistencies remain in how global financial reforms are applied. These inconsistencies can undermine market efficiency, financial stability, and the integrity of regulatory frameworks.
Bailey reiterated the FSB's commitment: "The FSB remains steadfast in its mandate to promote timely and consistent implementation." He noted that the next phase of the review will examine reasons behind these implementation gaps and propose recommendations to strengthen monitoring processes.
He also pointed out that developments such as artificial intelligence in finance and the use of stablecoins require closer scrutiny. To address these challenges, Bailey wrote that "the FSB will enhance its surveillance capabilities by improving its agility to recognise and respond to emerging vulnerabilities and strengthening engagement with stakeholders, including the private sector." Improved communication of assessments is also planned to help stakeholders better manage risks.
For the October G20 meeting, the FSB is submitting four reports: a consolidated progress report on cross-border payments; a report on monitoring adoption of artificial intelligence in finance; the interim implementation monitoring review; and a thematic review on crypto-asset regulatory frameworks.
The FSB’s strategic review was initiated at the request of South Africa's G20 Presidency. It aims to identify opportunities for improving how member jurisdictions implement agreed reforms. The review team is led by Quarles and includes senior officials from Saudi Arabia, Germany, the Bank for International Settlements, and Japan.
The FSB brings together authorities from 24 countries as well as international institutions and sector-specific regulatory groups. Its Secretariat is based in Basel, Switzerland, hosted by the Bank for International Settlements. Andrew Bailey also serves as Governor of the Bank of England.