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  • Financial Stability Board informs G20 of 2022 priorities

    Federal Issues

    On February 14, the Financial Stability Board (FSB) sent a letter to the G20 finance ministers and central bank governors outlining several priorities for 2022 and setting the groundwork for promoting global financial resilience during the upcoming year. The FSB stated that the “transition path to a post-pandemic economy remains highly uncertain,” and warned that Covid-19 continues to weigh on the global economy with “[n]ew waves of infections … contribut[ing] to an uneven recovery across regions, higher inflation, and record-high debt levels globally.” The FSB also observed that, while banks and financial market infrastructures were able to absorb the macroeconomic shock of the pandemic, the nonbank financial intermediation sector (NBFI), which currently represents nearly half of global financial assets, experienced acute stress and needs to be strengthened. A resilient NBFI sector would reduce the need for extraordinary central bank intervention, the FSB stated. The FSB’s plans include prioritizing its work in this space in coordination with other standard-setting bodies to address any shortcomings and develop a systemic approach to the NBFI sector. Another priority is addressing potential financial stability risks associated with rapidly developing crypto-assets and digital innovation. The FSB observed that “[c]rypto-asset markets are fast-evolving and could reach a point where they represent a threat to global financial stability due to their scale, structural vulnerabilities and increasing interconnectedness with the traditional financial system.” Financial risks resulting from climate change are another critical area of concern for the FSB. The FSB’s work this year will include ensuring these risks are properly reflected in all financial decisions related to disclosures, data, vulnerabilities analysis, and regulatory and supervisory approaches.

    Federal Issues FSB Of Interest to Non-US Persons G20 Covid-19 Climate-Related Financial Risks Fintech Nonbank

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  • House passes America COMPETES Act

    Federal Issues

    On February 4, the U.S. House passed, by a vote of 222-210, the “America Creating Opportunities for Manufacturing Pre-Eminence in Technology and Economic Strength (COMPETES) Act” H.R. 4521, which aims to strengthen the competitiveness of the U.S. economy and U.S. businesses, and counters anti-competitive actions taken by the People’s Republic of China. The COMPETES Act includes provisions affecting financial services, such as:

    • U.S. Policy on World Bank Group and Asian Development Bank Loans to China. This provision would, among other things, direct Treasury to vote against any loans to China from the World Bank or Asian Development Bank under certain circumstances, and allow borrowing countries to seek restructuring of China loans in official multilateral debt relief forums.
    • Prohibitions or Conditions on Certain Transmittal of Funds. This provision would streamline the process by which special measures may be introduced and modernizes the authorities granted to the FinCEN by permitting the agency to pursue bad actors.
    • Study on Chinese Support for Afghan Illicit Finance. This provision would direct Treasury’s Office of Terrorism and Financial Intelligence to brief Congress on the identification and analysis of Chinese economic, commercial, and financial connections to Afghanistan, to include illicit financial networks involved in narcotics trafficking, illicit financial transactions, official corruption, natural resources exploitation, and terrorist networks.
    • Support for Debt Relief for Developing Countries. This provision would direct the Treasury secretary and U.S. representatives at the International Monetary Fund and the World Bank to engage with international financial institutions, official creditors, and relevant commercial creditor groups to advocate for the effective implementation of the G-20’s Common Framework.

    Federal Issues Federal Legislation U.S. House FinCEN Financial Crimes Debt Relief G20 China

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  • Financial Stability Board issues letter to G20 Finance Ministers and Central Bank Governors

    Fintech

    On March 18, the Financial Stability Board (FSB) released a letter previously sent to G20 Finance Ministers and Central Bank Governors on March 13, which set forth priorities designed to “reinforce the G20’s objective of strong, sustainable and balanced growth.” Among other things, FSB presented its initial assessment that “crypto-assets do not pose risks to global financial stability at this time” due to their “small size” and “limited use for real economy and financial transaction”; however, FSB stressed that this assessment is subject to change should crypto-assets become more widely used or integrated within the regulated financial system. “Crypto-assets raise a host of issues around consumer and investor protection, as well as their use to shield illicit activity and for money laundering and terrorist financing,” the letter stated. “At the same time, the technologies underlying them have the potential to improve the efficiency and inclusiveness of both the financial system and the economy.” The letter also described priority deliverables FSB planned to implement, such as (i) Basel III banking reforms; (ii) policy to de-risk correspondent banking; (iii) a toolkit on governance measures to address misconduct risk; (iv) evaluations of certain financial reforms; and (v) a financial sector cybersecurity lexicon. The FSB also noted that it would continue to shift away from policy development and instead focus on the transparency and efficiency of its existing programs.

    Fintech Digital Assets Cryptocurrency G20 Financial Stability Board Basel

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