The more difficult economic and financial conditions since the start of this year reflect in part downward revisions to the expected medium-term growth prospects of the world economy as a result of renewed appreciation of the structural challenges facing a number of advanced and emerging economies. More specifically in the financial sector they also reflect concerns that many banks have more to do to adjust their long-term business models to the lower growth/lower nominal interest rate environment and to the strengthened international regulatory framework.
At the same time the greater resilience of the financial system resulting from that new regulatory framework will ensure that the financial system can better support jobs and growth in the short, medium and long term. Recent market turbulence really serves to underline the importance of continued progress in building resilient financial institutions and markets.
The imperative now is to implement fully and consistently our past agreements. Authorities also need to remain vigilant to new risks and vulnerabilities and to ensure that markets are supported by robust financial infrastructure. In this manner the G20 can develop a diverse and open global financial system that can finance investment in the real economy throughout the economic cycle.
The FSB’s priorities for 2016 to promote these objectives are:
1. Supporting the full and consistent implementation of post crisis reforms, while remaining ready to address any material unintended consequences.
2. Addressing new and emerging vulnerabilities in the financial system, including potential risks associated with market-based finance, asset management activities, conduct, correspondent banking and climate change.
3. Promoting robust financial infrastructure, working with CPMI and IOSCO to assess policies on central counterparty (CCP) resilience, recovery and resolvability, and recommending any necessary improvements.
And we are supporting the objectives of the Chinese G20 Presidency by:
4. Drawing lessons, working with the IMF and the BIS, from the practical application of macroprudential policy frameworks and tools.
5. Assessing the systemic implications of financial technology innovations, and the systemic risks that may arise from operational disruptions.
This letter sets out the FSB’s work programme to advance these and other goals during the Chinese G20 Presidency in 2016.
The full letter is available at http://www.fsb.org/wp-content/uploads/FSB-Chair-letter-to-G20-Ministers-and-Governors-February-2016.pdf