The policy group created to safeguard the global financial system in the wake of the financial crisis — the Financial Stability Board (FSB) — is undertaking a strategic review of its readiness for future episodes of market turmoil.
In the wake of events — such as the pandemic-driven market liquidity crunch, and the systemic stress that resulted in the failure of several large banks in early 2023 — which revealed potential weaknesses in the FSB’s framework for addressing financial crises, the group is undertaking a review that will aim to beef up its preparations.
“These episodes highlighted its significant benefits but also uncovered gaps in the framework and its implementation, underscoring the need for better integration with broader crisis preparedness activities,” the FSB noted.
Among other things, the strategic review is intended to strengthen the group’s crisis preparedness, “to respond to changes and emerging vulnerabilities in the global financial system,” it said.
Specifically, it will look to beef up its readiness to respond to all stages of a crisis, from early intervention through to recovery, resolution and restructuring — including potential reforms to the FSB’s internal processes and organizational structure.
Additionally, the FSB said it’ll consider how to ensure its standards for “effective resolution regimes,” which were launched in 2011, are adopted as the international standard for resolving financial institutions.
“A resilient global financial system depends on the ability of authorities to respond swiftly and effectively to financial institution distress or sectoral disruptions. This, in turn, requires thorough preparation by both authorities and financial institutions in advance of any potential failure,” the group noted.
Andrea Enria, former chair of the supervisory board of the European Central Bank (ECB) and the first chair of the European Banking Authority (EBA), has been tapped to lead a high-level group that will carry out the review.
“The ability to manage crises effectively is not just a technical requirement but a cornerstone of global financial stability. I am honoured to chair this strategic review of the FSB’s crisis preparedness activities, which aims to ensure that the crisis management framework remains credible and fit for purpose,” Enria said in a release.