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FSB assesses post-financial crisis reform and climate-related disclosure progress

The Financial Stability Board (FSB) backed by the G-20, assessed reforms introduced following the financial crisis of 2008, its work on financial technology, financial sector misconduct and climate-related financial disclosures in a meeting held at the end of February.

The FSB promotes global financial stability by coordinating the development of regulatory, supervisory and other financial sector policies and conducting outreach to non-member countries. The meeting reached agreement on the emerging findings from the FSB’s monitoring of the evolution of shadow banking activities and the adequacy of associated monitoring and policy tools. The FSB also discussed the review of progress in over-the-counter derivatives reforms and their effects to date.

There was a discussion on the progress on its development of a consistent comprehensive framework for evaluating the post-implementation effects of the reforms. The FSB said this framework underscores the importance of effective evaluation and impact assessment to its policy review process. The framework will be published before the G20 Summit in July, and will be open to consultation.

The Financial Stability Board said the framework is being developed in close collaboration with the standard-setting bodies and with input from its members and other stakeholders. It will be used over time to analyse whether the G20 reforms are achieving their intended outcomes, and help identify material unintended consequences that may have to be addressed without compromising on the objectives of the reforms.

There was also discussion of the actions being taken to address misconduct of individuals that could damage financial stability. These include an assessment of the efforts by national authorities, international bodies, standard-setters and firms to strengthen governance frameworks to mitigate misconduct risks. The meeting agreed to carry out further work on information gaps and due diligence in the employment of individuals with a history of misconduct; responsibility mapping; and the role of corporate culture.

There has also been a draft consultation paper produced on the use of compensation tools to address misconduct, which the FSB said would be issued as supplementary guidance to the its Principles and Standards on Sound Compensation Practices. The consultation will be published in advance of the G20 Leaders’ Summit.

The meeting also reviewed a summary by the Task Force on Climate-related Financial Disclosures (TCFD) of responses to its public consultation which ended in February. The TCFD’s final report will provide a set of voluntary, consistent disclosure recommendations for use by companies in providing information to investors, lenders, and insurance underwriters about their climate-related financial risks. The report and recommendations will be published in June and presented to the G20 Leaders’ Summit.

The FSB also welcomed a proposal by the TCFD to continue its work until at least September 2018 with a focus on promoting and monitoring adoption of the TCFD’s recommendations by companies and evaluating the extent to which the recommended disclosures are meeting the interests of users.

What do you think?