Financial Stability Board should concentrate on genuinely systemic risks, review finds

A review of the Financial Stability Board (FSB) has concluded that the global watchdog should be more selective when prioritising new work, focusing on vulnerabilities that are cross-border, cross-sectoral, and systemic. The Independent Monitoring Review (IMR), chaired by former FSB chair and former US Federal Reserve vice chair for supervision, Randal Quarles, found that national factors such as legal frameworks, market structures, and political capacity were the primary reasons for the lag in implementation of FSB recommendations.

The IMR report, published on Wednesday, highlighted that the FSB's own processes had not always adequately considered these national factors, sometimes making implementation more challenging or contentious than necessary. The review recommended that the FSB adopt high-level principles when a vulnerability is still emerging, only adding more detailed requirements as its understanding of the risks develops.

The FSB has recently made recommendations to improve cross-border payments, supervise global stablecoins, and develop non-binding guidance on AI use. On Wednesday, the FSB also proposed eight recommendations aimed at modernising supervision frameworks.