On 18 October 2021, the Financial Stability Board (FSB) published a speech by its chair, Randal K Quarles, titled ‘Financial Stability and Coordination in Times of Crisis’.
In his speech, Mr Quarles focuses on four areas:
- Reacting and responding to crisis: Leveraging cooperation to ensure stability and contain spill- During the decade between the global financial crisis and the start of the COVID-19 pandemic, members of the FSB worked alongside each other and focused on enhancing the global financial system’s resilience to shocks. Through various ways, members built trust amongst themselves which helped prepare the FSB to work together during the pandemic. Mr Quarles outlines the number of steps the FSB had taken throughout the COVID-19 crisis.
- Moving from analysis to action: Non-bank financial intermediation under the COVID-19 lens. The FSB assembled a team to assess vulnerabilities in the non-bank sector and to coordinate and drive forward any needed reform. The recent report published by the FSB, titled, ’Policy Proposals to Enhance Money Market Fund Resilience’ sets out a framework for assessing vulnerabilities in money market funds as well as a policy toolkit. The FSB working alongside the International Organization of Securities Commissions, will review members’ progress in two years followed by a more thorough assessment in five years’ time.
- Lessons from the COVID-19 event: Later this month, the FSB will be publishing a number of reports which will cover a range of topics that relate to the COVID-19 pandemic, which will also include their interim findings on the lessons learned. Mr Quarles also shares his own observations to the key lessons learned. These observations include where policy may fail to have the desired effect. Mr Quarles states that he found banks’ apparent reluctance to use buffers an interesting lesson from the COVID-19 pandemic. Some evidence suggests that banks may have been hesitant to use their regulatory capital buffers to meet credit demand (despite the stated intent from supervisors that banks should use their buffers under stress). This may be due to uncertainty regarding potential future losses or the wider market stigma that may result if a bank were to use its buffers. Perhaps the extensive fiscal and monetary support provided to borrowers averted banks’ need to use buffers.
- Renewed focus on 2022 and beyond. The FSB will continue convening G20 policymakers and experts to assess vulnerabilities, coordinate policy responses, and evaluate effectiveness whilst striving to consult with a variety of stakeholders who can help the FSB respond to financial vulnerabilities. They will also monitor crypto assets and stablecoins.