Synthesis
The Financial Stability Board (FSB) is consulting on eight principles to guide financial authorities in FSB member jurisdictions in adapting regulation and supervision to evolving risks while reducing unnecessary complexity and duplication. Building on internationally agreed standards and reflecting domestic circumstances, the principles call for modernisation to become an ongoing part of designing, implementing and reviewing frameworks, with the aim of preserving or enhancing financial system resilience. Authorities should consider tailoring requirements to institutions’ risk profile, size, complexity and systemic importance, and address in a timely manner the risks they judge material, including emerging vulnerabilities. Supervision should be clear and streamlined, with technology complementing rather than replacing supervisory judgement, and regulation should remain responsive to innovation. Authorities in the same jurisdiction should coordinate to improve coherence and minimise duplicative information collection. Significant policy changes should be informed by stakeholder consultation and assessment of expected costs, benefits and cumulative effects, with ongoing reviews testing whether frameworks achieve their intended outcomes.
Purpose & rationale
Post-Global Financial Crisis reforms underpin today’s global financial stability framework which, by many metrics, has been a success. To remain effective, however, regulatory and supervisory frameworks must adapt to new vulnerabilities, technologies, offerings and economic conditions while preserving sufficient predictability. Responsible governance also calls on authorities to assess whether frameworks have unintended inefficiencies or negative consequences that can be minimised without reducing resilience. With many FSB members having initiated or completed such reviews, the FSB proposes principles to promote alignment across these efforts.
Proposed principles
8 principles
The FSB proposes eight high-level principles for financial authorities, drawing on FSB members’ existing practices and granting discretion on how to implement them.
| Principle | Description | Details |
|---|---|---|
01The ongoing practice of modernisation | Pursue modernisation on an ongoing basis when designing, implementing and reviewing regulatory and supervisory frameworks | |
02Proportionality and tailoring | Consider varying regulatory and supervisory frameworks according to an institution’s nature, size, complexity, risk profile, business model and systemic importance | |
03Focus on material risks | Design frameworks to address, in a timely manner, all financial or other risks that, in the authority’s judgement, materially threaten financial stability, safety and soundness or other mandated objectives | |
04Effective and efficient supervisory frameworks | Ensure supervision is forward-looking, risk-based, transparent, accountable and guided by expert analysis and judgement | |
05Forward-looking and effective regulatory frameworks | Adopt forward-looking, fit-for-purpose and risk-based regulatory frameworks | |
06Coherence in domestic frameworks | Pursue coherence across regulatory and supervisory frameworks among financial authorities in the same jurisdiction | |
07Transparency and accountability in policymaking, including impact analysis | Communicate and consult with a broad range of stakeholders, in a timely and strategic way, on the rationale of proposed policies to obtain feedback on problem definition, policy design and calibration | |
08Efficiency and effectiveness of regulatory reporting and disclosure | Ensure reporting and disclosure requirements are efficient, necessary and proportionate, and support effective regulation and supervision |