Financial Stability Board

On July 16, 2018, the Financial Stability Board (“FSB”) issued a report to the G20 Ministers of Finance and Central Bank Governors summarizing the work that the FSB and other international standard-setting bodies have undertaken regarding crypto-assets.  The FSB notably reported that it has developed a framework for monitoring financial stability risks related to crypto-assets, including proposed metrics based largely on public sources.  The FSB also acknowledged that crypto-assets and crypto-asset platforms do not pose a material risk to global financial stability at this time.

Continue Reading FSB Develops Framework for Monitoring Crypto Risks

In a little noticed, but important, speech, the Federal Reserve’s Vice Chairman for Supervision, Randal K. Quarles, reaffirmed late last month that the Fed remains committed to continued collaboration with international financial regulators.

International cooperation through, for example, the Basel Committee and the Financial Stability Board (FSB), has been a key pillar of post-financial

On March 30, 2017, the Basel Committee on Banking Supervision (“BCBS”) issued a consultative document to revise the methodology it uses to measure the systemic importance of internationally active banks.  The BCBS methodology incorporates various quantitative indicators of a bank’s “Cross-Jurisdictional Activity,” “Size,” “Interconnectedness,” “Substitutability,” and “Complexity” to arrive at a single score of each internationally active bank’s systemic importance.  The Financial Stability Board uses the BCBS methodology to identify global systemically important banks (“G-SIBs”) and categorize G-SIBs into different capital “buckets” by which national supervisors are to impose escalating capital surcharges.

Of particular note, the BCBS proposal seeks comment on whether the G-SIB assessment methodology should incorporate a measure of a bank’s reliance on short-term wholesale funding (“STWF”).  In the United States, the Federal Reserve has already incorporated a STWF factor into its G-SIB surcharge rule by introducing a “method 2” for calculating each U.S. G-SIB’s score and capital bucket.  (The Federal Reserve’s “method 1” is based on the BCBS standard.)  The scores of U.S. G-SIBs are generally significantly higher under the Federal Reserve’s method 2 than under its method 1 and the BCBS methodology.

Continue Reading Basel Committee Proposes Use of Short-Term Wholesale Funding Indicator in G-SIB Surcharge Methodology