The Financial Stability Board (FSB) Regional Consultative Group for Asia (RCG Asia) discussed recent financial market developments and their impact on the region, vulnerabilities arising from non-bank financial intermediation (NBFI), the deepening of the sovereign-bank nexus in some emerging market and developing economies (EMDEs), and ways to promote effective regulation and supervision of crypto-asset related risks.
The global financial system is adjusting to a higher interest rate environment. More fundamentally, the current tightening is occurring in a global financial system where the provision of finance through non-banks is comparable in size to bank credit. In addition, some EMDEs face a challenge from the combination of high government debt and large bank holdings of domestic government bonds.
The group discussed the impact of tightening global financial conditions in the region and issues arising from the development of the sovereign-bank nexus, which refers to larger holdings of domestic sovereign debt by emerging market banks and consequent deepening of the ties between the sovereign and banking sectors. The group also discussed vulnerabilities arising from NBFI. Members shared their experiences of identifying, monitoring, and addressing these risks.
The group discussed progress in implementing regulatory frameworks for crypto asset activities in their jurisdictions and ways to ensure effective and coordinated implementation of the comprehensive policy response for crypto assets. This included, among others, enhanced capacity building, data sharing and more frequent dialogue among members.
The FSB RCG Asia is co-chaired by Eddie Yue, chief executive of the Hong Kong Monetary Authority and P Nandalal Weerasinghe, governor of the Central Bank of Sri Lanka. Membership of the RCG Asia comprises financial authorities from Australia, Brunei Darussalam, Cambodia, China, Hong Kong SAR, India, Indonesia, Japan, Korea, Malaysia, New Zealand, Pakistan, Philippines, Singapore, Sri Lanka, Thailand and Vietnam.