G20 wants to check if the current banking regulation is enough

The Financial Stability Board (FSB), which is a member of the G20 countries, wants to see if the current bank supervision and settlement regulation is sufficient to guarantee financial stability.

In a letter to the G20 finance ministers, who are meeting today and tomorrow in Washington, FSB Chairman Klaas Knot says that “financial stability has become more difficult in recent weeks as a result of the turbulence in the banking sector”.

Knot refers to the collapse of the US banks Silicon Valley Bank and SignatureBank and the acquisition of the Swiss Credit Suisse by UBS, which was organized on a state basis.

The president of the Dutch central bank De Nederlandsche Bank also says in the letter that the FSB does not lower its guard and “is prepared to take political measures to maintain the resilience of the global financial system.

He FSB warns of the high levels of debt of the banks, that some had foreseen in their business models that interest rates would be low and stable and that some of their assets are overvalued.

Non-bank financial intermediaries have a lot of leverage (borrowing to invest) and liquidity mismatches.

These problems may further tighten financial conditions and slow down economic activity.

Knot also says in the letter that reforms implemented after the 2008 global financial crisis have helped the banking sector in general to be better able to absorb adverse shocks, but “recent events provide important lessons for financial policymakers, including financial frameworks.” prudence and resolution of banks”.

For this reason the FSB works closely with the Basel Committee on Banking Supervision and other regulators to set policy priorities.

The Financial Stability Board, whose headquarters are in the Swiss city of Basel, was created at the G20 meeting in London in 2009 due to the financial crisis and has been monitoring financial stability ever since.