FSB talks CCPs, OTC derivatives, correspondent banking

The Financial Stability Board (FSB) met in Chengdu today to discuss current vulnerabilities and progress in addressing priority areas and deliverables for the G20 Leaders’ Summit in Hangzhou in September, including:

  • Supporting the full, timely and consistent implementation of post-crisis reforms, while remaining ready to address any material unintended consequences.
  • Addressing new and emerging vulnerabilities in the financial system, including potential financial stability risks associated with market-based finance, misconduct, and the reduction in correspondent banking relationships.
  • Promoting robust financial infrastructure, by working with the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) to assess policies on central counterparty (CCP) resilience, recovery and resolvability, and to recommend any necessary improvements.
  • Promoting effective macroprudential policymaking, by examining jointly with the International Monetary Fund (IMF) and the Bank for International Settlements (BIS) lessons learned from national and international experience.

Excerpts from the press release:
Resilience, recovery and resolvability of central counterparties
The FSB, CPMI, IOSCO, and Basel Committee on Banking Supervision (BCBS) are taking forward a joint workplan to promote CCP resilience, recovery planning and resolvability, which includes a study of interdependencies in central clearing. A progress report will be published ahead of the G20 Summit. The Plenary received updates on forthcoming CPMI-IOSCO additional guidance on CCP resilience and an FSB discussion note on CCP resolution, on which public consultations will take place ahead of the G20 Summit, and considered a discussion note by the Co-Chairs of CPMI-IOSCO on a macroprudential approach for CCPs.
Implementation of reforms to over-the-counter (OTC) derivatives markets
Remaining issues with the quality and completeness of trade repository data for OTC derivatives transactions limit authorities’ ability to access, use and aggregate these data. FSB member jurisdictions had agreed, as follow-up to the November 2015 FSB Thematic Review of OTC Derivatives Trade Reporting, to report by mid-2016 their plans to remove by 2018 identified legal barriers to the full reporting of, and authorities’ access to, information about these transactions. The Plenary discussed the report and re-emphasised the importance of addressing remaining barriers and discussed a draft summary of jurisdictions’ plans, which will be published ahead of the G20 Summit.
Addressing the decline in correspondent banking relationships
In November 2015 the FSB announced a four-point action plan to address the decline in correspondent banking relationships, coordinating with the BCBS, CPMI, Financial Action Task Force (FATF), IMF, World Bank, FSB member authorities and FSB Regional Consultative Groups. A Correspondent Banking Coordination Group (CBCG) was established in March 2016 to implement the action plan, which is: (i) further examining the dimensions of the decline and implications for financial inclusion and financial stability; (ii) clarifying regulatory expectations, including through more guidance by the FATF; (iii) supporting domestic capacity-building in jurisdictions that are home to affected respondent banks; and (iv) strengthening tools for due diligence by correspondent banks. The Plenary endorsed an approach for conducting a survey, to be circulated to banks via national authorities. The CBCG is engaged in constructive dialogue with the FATF on the clarification of regulatory expectations, including the definition of correspondent banking. The FSB will publish an interim report on the action plan ahead of the G20 Summit.
The full press release is available at http://www.fsb.org/2016/07/meeting-of-the-financial-stability-board-in-chengdu-on-21-july/

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