Knowledge Base
Describe the role and functions of the Financial Stability Board (FSB) within the international regulatory framework
Which body is responsible for promoting standards for the banking sector in collaboration with the FSB?
The Basel Committee on Banking Supervision (BCBS) is the body responsible for promoting standards for the banking sector. The FSB collaborates with several sectoral bodies, including the BCBS, to select and promote standards relevant to financial stability.
Which body collaborates with the FSB on Early Warning Exercises?
The FSB collaborates with the International Monetary Fund (IMF) on Early Warning Exercises. These exercises aim to anticipate potential crises by identifying emerging risks.
What was the main reason for the creation of the Financial Stability Board (FSB) in 2009?
The FSB was created in response to the 2008 financial crisis, which revealed the absence of an effective coordination mechanism between national financial authorities and sectoral standard-setting bodies. Its creation was formalised at the G20 London summit in April 2009.
What is the minimum total loss-absorbing capacity (TLAC) required for global systemically important banks?
The TLAC standard requires global systemically important banks to maintain a loss-absorbing capacity of at least 18% of risk-weighted assets and 6.75% of the leverage ratio denominator. These requirements aim to strengthen financial resilience.
The FSB has the power to create binding financial standards for its members.
The FSB does not create binding standards. It operates through moral suasion and peer pressure. Its recommendations do not carry legally binding force, but they are often adopted thanks to the political legitimacy conferred by the G20.
Decisions within the FSB are made by majority vote.
Decisions within the FSB are made by consensus, which gives strong legitimacy to the FSB's outputs. This decision-making mechanism ensures that all stakeholders agree on the recommendations, although these do not carry legally binding force.
Categorize items by dragging them to the appropriate zones
Items to categorize:
Prevention
Crisis management
Coordination
The FSB's functions can be classified into three categories: prevention (vulnerability assessment, market monitoring), management (cross-border crisis support), and coordination (collaboration with standard-setting bodies, promotion of commitments).