In a letter to G20 Finance Ministers and Central Bank Governors, Financial Stability Board (FSB) Chair Andrew Bailey submitted three deliverables requested by the G20 Presidency: a report setting out policy recommendations to address financial stability risks created by nonbank financial intermediation (NBFI) leverage, a workplan to tackle nonbank data challenges, and an update on the FSB Roadmap for Addressing Financial Risks from Climate Change. The letter also notes that the FSB is monitoring market developments following volatility linked to nonbank sector vulnerabilities in April and will consider lessons from those market events. The NBFI leverage report is presented as completing another major part of the FSB’s multi-year NBFI programme and focuses on leverage-related risks in financial markets that are central to the financial system, including risks transmitted through interlinkages between leveraged nonbanks and systemically important financial institutions acting as leverage providers. It calls for authorities to maintain domestic frameworks to identify and monitor risks created by NBFI leverage and to select, design and calibrate policy measures, or combinations of measures, in a flexible, targeted and proportionate way, noting the growth of hedge fund and other leveraged investor positions in sovereign bond markets. On data, the FSB highlights challenges in availability and reporting, quality, use, and data and information sharing, and has established a small, high-level Nonbank Data Task Force that has adopted a workplan including a test case on leveraged trading strategies in sovereign bond markets. The climate roadmap update covers work since 2021 across data, disclosures, vulnerabilities analysis, and regulatory and supervisory practices and tools, and sets out a medium-term approach that will be reviewed annually. Bailey also outlined priorities for his term including enhancing the FSB’s surveillance capabilities, supporting implementation of agreed NBFI policies, exploring vulnerabilities from the growing role of private finance, assessing the increasing role of stablecoins for payment and settlement purposes, and increasing focus on the G20 cross-border payments roadmap. He pointed to the G20 Implementation Monitoring Review as a basis for strengthening implementation of agreed standards and for identifying improvements to the FSB’s operational effectiveness and external communication.

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