FSB - Financial Stability Forum
The FSB, which was re-established in April 2009 as the successor to the Financial Stability Forum (FSF), brings together national authorities responsible for financial stability in significant international financial centres, international financial institutions, sector-specific international groupings of regulators and supervisors, and committees of central bank experts. It promotes international financial stability through enhanced information exchange and cooperation in financial supervision and surveillance.
The FSB is chaired by Mario Draghi, Governor of the Bank of Italy. Its Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements.
For further information on the FSB, visit: link
G20 Leaders’ recommendations to strengthen financial stability can be found at: link
A very major piece of the new international architecture is the newly configured Financial Stability Board-FSB.
At the spring meeting of the IMF/World Bank, NWV had asked former BIS Managing Director, Sir Andrew Crockett, now with JP Morgan, what the role, power and function would be of the FSB.
He explained that while the chairs were still being arranged at the table, that it would act at the global level to oversee national stability risks, it would work with other regulators, it would review standards set by various board on the national level, and it would employ a ‘college of regulators’ that would define methodologies.
At the inaugural meeting held on June 26-27 in Basel, FSB Chairman Mario Draghi, Governor of the Bank of Italy, provided a detailed report on its new structure.
He explained; The FSB’s mandate is to assess vulnerabilities affecting the financial system; identify and oversee action needed to address them; promote coordination and information exchange among authorities responsible for financial stability; monitor and advise on market developments and their implications for regulatory policy; advise on and monitor best practice in meeting regulatory standards; undertake joint strategic reviews on the policy development work of the international standards setting bodies; set guidelines for and support the establishment of supervisory colleges; manage contingency planning for cross-broader crisis management; and collaborate with the IMF to conduct Early Warning Exercises.
The FSB was given an official “plenary” structure which would be like the structure of any other international body, like the plenary of the United Nations.
It will be comprised of G20 central bank ministers, treasury secretaries, and regulatory authorities. It will have a Steering Committee and three Standing Committees: for Vulnerabilities Assessment; Supervisory and Regulatory Cooperation; and Standards Implementation.
The Standing Committee for Supervisory and Regulatory Cooperation will address coordination issues that arise among supervisors and regulators and set guidelines for and oversee the establishment and effective functioning of supervisory colleges.
A number of questions have been raised with regard to the college of supervisors which will be a key component of the FSB. In April, 2008, the G7 welcomed the idea of the college of supervisors to make the world’s financial markets less risky.
Paulson’s blueprint and his recommendation to bring all of the different U.S. regulatory bodies under one agency is key to making the supervisory colleges work. Many on the international level wanted to be the one responsible for suggesting it, Gordon Brown of the UK being one of them. The supervisory college would monitor the world’s top 30 financial firms in order to have “effective cross-border supervision.” This would be formally agreed to by Memorandum of Understanding which would describe how it will function, be organized and coordinate between supervisors, banks, and countries.
The FSB will be comprised of the Group of Seven plus: Argentina, Australia, Brazil, China, Hong Kong SAR, India, Indonesia, Korea, Mexico, Netherlands, Saudi Arabia, South Africa, Spain, Switzerland, and Turkey. In addition the European Central Bank and the European Commission, as well a host of international financial institutions and international standard setting, regulatory and supervisory groups with participate.
The above constitutes a total restructuring of the entire financial system, mortgage system, insurance industry, non-banking institutions, and any other entity connected with money on a worldwide basis.
While the central banks control the monetary system, they are now being given complete centralization of these financial powers. Congress can argue about whether or not they will put all of our regulatory agencies under one roof, but the real truth is that they don’t have the power to do that.
The Federal Reserve, along with Treasury have already been playing a major role to help put into place the new financial and regulatory infrastructure.
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