Financial Stability Board Publishes Update on Market Fragmentation Work
10/14/2019The Financial Stability Board has published a progress update on its ongoing work to tackle market fragmentation. The update follows the FSB’s June 2019 Report on Market Fragmentation, which explored the link between market fragmentation and financial stability and identified four areas for further work to address the issue: deference (e.g. the reliance authorities place on one another when regulating or supervising participants on a cross-border basis); pre-positioning of capital and liquidity; regulatory and supervisory coordination and information-sharing; and market fragmentation as part of the evaluation of reforms, starting with the “too-big-to-fail” evaluation.
The FSB and other international bodies have taken the following steps in relation to each of the four key areas identified:
- Deference – the International Organization of Securities Commissions has published a series of proposals to strengthen cooperation between IOSCO members and so mitigate the future risk of fragmentation; it will consider whether and how to take its proposals forward at its October 2019 meeting and would cooperate with the FSB on any considerations relevant to the FSB’s mandate;
- Pre-positioning of capital and liquidity – the FSB’s total loss-absorbing capacity standards require a proportion of TLAC resources to be pre-positioned (e.g. placed on balance sheets) at material sub-groups in host jurisdictions to ensure appropriate distribution of loss-absorbing and recapitalization capacity within global systemically important banks; the FSB held a workshop with industry representatives and academics in September 2019 to consider approaches to ensuring sufficient pre-positioning of resources; the FSB intends to conduct further work in this area;
- Regulatory and supervisory coordination and information-sharing – the FSB plans to establish a structured process for members to discuss issues surrounding the interaction of policy proposals and is considering establishing a repository to provide information on regulatory initiatives that could have a cross-border element; and
- Too-big-to-fail evaluation – the FSB is considering whether TBTF reforms are achieving their intended objectives and will also consider the broader effects of the reforms on the financial system; a draft evaluation report on the subject will be issued for public consultation in June 2020 with the final report to be published in late 2020.
View the FSB's progress report.
Return to main website.