FINANCIAL STABILITY BOARD: BASEL

July 17, 2011 at 7:25 am | Posted in Economics, Financial, Globalization, History, Research | Leave a comment

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Financial Stability Board

The Financial Stability Board (FSB) is an international body that monitors and makes recommendations about the global financial system. It was established after the 2009 G-20 London summit in April 2009 as a successor to the Financial Stability Forum. The Board includes all G-20 major economies, FSF members, and the European Commission. It is based in Basel, Switzerland.[1]

Background

The Financial Stability Board emerged from the Financial Stability Forum (FSF), a group of finance ministries, central bankers, and international financial bodies. The FSF was founded in 1999 to promote international financial stability, after discussions among Finance Ministers and Central Bank Governors of the G7 countries, and a study which they commissioned.[2] The FSF facilitated discussion and co-operation on supervision and surveillance of financial institutions, transactions and events. FSF was managed by a small secretariat housed at the Bank for International Settlements in Basel, Switzerland.[3] The FSF membership included about a dozen nations who participate through their central banks, financial ministries and departments, and securities regulators, including: the United States, Japan, Germany, the United Kingdom, France, Italy, Canada, Australia, the Netherlands and several other industrialized economies as well as several international economic organizations.[4] At the G20 summit on November 15, 2008 it was agreed that the membership of the FSF will be expanded to include emerging economies, such as China. The 2009 G-20 London summit decided to establish a successor to the FSF, the Financial Stability Board. The FSB includes members of the G20 who were not members of FSF.[5]

The Financial Stability Forum met in Rome on 28–29 March 2008 in connection with the Bank for International Settlements. Members discussed current challenges in financial markets, and various policy options to address them from this point forward.[6] At this meeting, the FSF discussed a report to be delivered to G7 Finance Ministers and Central Bank Governors in April 2008. it identifies key weaknesses underlying current financial turmoil, and recommends actions to improve market and institutional resilience. The FSF discussed work underway at the International Monetary Fund (IMF) and Organisation for Economic Co-operation and Development (OECD) with regard to sovereign wealth funds (SWFs). The IMF is working closely with SWFs to identify a set of voluntary best practice guidelines, and is focusing on the governance, institutional arrangements and transparency of SWFs.[6] On April 12, 2008 the FSF delivered a report to the G7 Finance Ministers which details out its recommendations for enhancing the resilience of the financial markets and financial institutions. These are in five areas:

  • Strengthened prudential oversight of capital, liquidity and risk management
  • Enhancing transparency and valuation
  • Changes in the role and uses of credit ratings
  • Strengthening the authorities’ responsiveness to risks
  • Robust arrangements for dealing with stress in the financial system [1]

Overview

The FSB represents the G-20 leaders’ first major international institutional innovation. Secretary of the US Treasury Tim Geithner has described it as “in effect, a fourth pillar” of the architecture of global economic governance. The FSB has been assigned a number of important tasks, working alongside the IMF, World Bank, and WTO. Chairman of the board is the Italian Mario Draghi, current Governor of Banca d’Italia, the Italian central bank.[7]

Financial Stability Board

The Financial Stability Board (FSB) is an international body that monitors and makes recommendations about the global financial system. It was established after the 2009 G-20 London summit in April 2009 as a successor to the Financial Stability Forum. The Board includes all G-20 major economies, FSF members, and the European Commission. It is based in Basel, Switzerland.[1]

References
1.                            
 http://www.financialstabilityboard.org/about/contact.htm
2.                            
 Genesis of the FSF, FSF website.
3.                            
 fsforum.org, main website.
4.                            
 FSF:Who we are.
5.                            
 http://www.fsforum.org/press/pr_090312b.pdf
6.                            
 a b Financial Stability Forum meets in Rome, 29 March 2008, Press release, Website of Bank for International Settlements
7.                            
 G20 London Summit, Leaders’ Statement 2 April 2009.

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