Financial Stability Board

This page introduces the FSB, its mandate and its structures. Go to these pages for information on its FSB Membership, Outreach to non-members, and Standing committees and working groups.

Why is it important?

The FSB is the body created expressly to coordinate the wide array of work at the international level conducted by national financial authorities and international standard setting bodies. This is in order to develop and promote the implementation of effective regulatory, supervisory and other financial sector policies. In performing its function, it has been described as the “fourth pillar” in the international financial architecture, joining the IMF, World Bank and WTO.

What does it do?

The FSB receives directives from the G20. Its Charter requires it to:

1. assess vulnerabilities affecting the global financial system and regulatory, supervisory and related actions needed to address them;
2. promote coordination and information exchange among authorities responsible for financial stability;
3. monitor and advise on market developments and their implications for regulatory policy;
4. advise on and monitor best practice in meeting regulatory standards;
5. undertake joint strategic reviews of the policy development work of the international standard setting bodies (in support of this mission the standards setting bodies will report to the FSB);
6. support the establishment of supervisory colleges;
7. support contingency planning for cross-border crisis management, particularly with respect to systemically important firms; and
8. conduct Early Warning Exercises in collaboration with the IMF.

How is it organised?

FSB is not a legal entity, it cannot enter into agreements or create legal rights or obligations (Article 16) and as such enforcement depends on peer pressure and “soft law”. Although the Secretary General and Secretariat Staff owe their duty entirely to the FSB and to no other authorities or institutions (Article 15.5), they are on secondment from member organisations (on whose payroll they remain) and member countries (temporarily on the BIS payroll).

The FSB comprises the Plenary, Steering Committee, Chairperson, Secretariat, Standing Committees and Working Groups. The Charter indicates that as the only decision-making body, the Plenary has absolute power. However, the Chair has the power to extend ad hoc invitations to non-FSB members and private sector representatives to, and call additional ad hoc Plenary Meetings; make suggestions on the leadership and composition of Standing Committees, Working Groups, and Steering Committee composition; decide on time and place of Steering Committee meetings; propose the appointment of and guide the Secretary General, and oversee the work of the Secretariat. The functions of Steering Committee, Secretariat, Standing Committees and Working Groups seem clear and do not clash with the roles of the Plenary and Chair.

FSB’s effectiveness may be judged in part on the effectiveness of the Supervisory Colleges, whose role the FSB has been reviewing[1]. The Charter says very little about them. BCBS defines them as “multilateral working groups of relevant supervisors that are formed for the collective purpose of enhancing effective consolidated supervision of an international banking group on an ongoing basis”. Meanwhile, BCBS has issued a set of enhanced “good practice principles” for supervisory colleges covering[2]: 1) Objectives; 2) Structures); 3) Information sharing; 4) Communication channels; 5) Collaborative work; 6) Interaction with the institution; 7) Crisis management; and 8) Macroprudential work.

The Chair is Mario Draghi (Governor of Italy’s Central Bank). The Secretary General is Svein Andresen.

The Charter deals with each under the following Articles:

• Plenary: Articles 4, 7, 8, 9, 10, 11
• Steering Committee: Articles 12, 13
• Chair: Articles 8, 9, 11, 12, 13, 14, 15
• Secretariat: Articles 11, 14, 15
• Standing Committees and Working Groups: Articles 11, 13, 15
• Supervisory Colleges: Article 2

Reference

· FSB Charter