On October 22, Financial Stability Board (FSB) Chair Klaas Knot spoke at a global regulatory forum in New York on the progress and ongoing challenges to strengthen global financial resilience since the 2009 G20 summit in Pittsburgh. Knot highlighted the significant regulatory reforms that have bolstered the financial system’s stability, but that recent market turmoil and bank failures underscored why more work is needed.
Knot emphasized three main areas of concern: (i) the incomplete implementation of the Basel III standards in the banking sector; (ii) the vulnerabilities in the nonbank financial sector; and (iii) the complexities introduced by technological innovations, including the risks associated with cryptocurrencies. Knot called for continued efforts to implement agreed-upon regulations and urged policymakers to preserve financial stability.
At the same forum, the Governor of the Bank of England, Andrew Bailey, discussed current challenges to global financial stability. Bailey stressed the need to maintain a macro-prudential perspective to address the correlated, concentrated, interconnected and opaque risks that threaten the financial system as a whole. Second, he warned against complacency, noting that memories of past financial crises tend to fade, leading to a false sense of security. Third, he pointed to the shift in financial intermediation from banks to nonbank financial institutions and the distinct challenges this presents, including the need for new surveillance tools to monitor risks in the nonbank sector. Bailey also discussed the importance of central banks reconsidering their liquidity provision tools for non-banks while preserving the uniqueness and singleness of money.
