IFI governance


How the Financial Stability Board Affects Development Prospects: Opening the Black Box

15 April 2011 | Minutes

A video of this event is available here

Jo Marie Griesgraber

FSB rights rules for the planet and makes the IMF look open, transparent and accountable

Matthew Martin, DFI

  • LICs demanding more representation on FSB, because it will decide on food speculation, tax havens etc
  • What is the FSB
  • – established post-crisis by G20 to coordinate on financial regulation
  • sets standards
  • G20+ important financial centres – some countries have 3 seats. No LIC members
  • Structure
  • Plenary of all members twice a year
  • many committees and working groups
  • Reports to G20, most work from G20 mandates, but some comes from elsewhere
  • No sign of engagement with UN despite supposed UN mandate to bring in developing country groups
  • Does not report or engage with G20 Development Working Group
  • How does it operate
  • Essentially run by the chair and key people in secretariat. Working groups very important. Determined by G20, but often FSb asks the G20 to ask FSB to do things.
  • Lack of formal procedures means chair has a lot of power
  • Overlap and lack of clarity with other institutions – IMF, BIS
  • IMF and WB have strong role in helping countries implement regulations
  • Key FSB subsidiaries / related organisations
  • Common features – high presence of private sector; no openness to civil society or the media; little or no presence of poorer countries
  • Why should we care?
  • Issue of principle – it’s in the stone age when it comes to accountability and transparency
  • Huge conflicts of interest
  • virtually no access for LICs
  • Key issues: IASB accounting standards are key for tax evasion, capital flight etc
  • IOSCO – derivatives and commodity trades etc
  • BCBS – banking regulation
  • Conclusion
  • Donelly – FSB is ‘mostly harmless- G8 doesn’t feel constrained by it.
  • Private sector doesn’t feel constrained
  • But crucial to development issues
  • need for a network to open up the FSB

Amar Bhattacharya

  • – Basic structure set up in 1999 in aftermath of Asian crisis
  • – It’s a network of networks – most of the bodies are official regulatory bodies (BIS, IOSCO, IAIS, CTSS) The only one that is private sector dominated in IASB
  • Various governance arrangements – some more democratic than others
  • – Must therefore look at the underlying governance structures of the bodies that make it up
  • Move from FSF to FSB was positive – FSF was accountable to noone; FSB is accountable to G20 – better but not good enough. Tasked by G20 – more political structure.
  • There is an active discussion on governance right now
  • What does the FSB do?
  • before crisis focus was on underlying weaknesses in emerging market financial systems.
  • Has been fundamental change since crisis – good change. Seriousness in G20 to tackle underlying weaknesses in financial system.
  • Active discussion at FSB has been an important part of shaping both global and national reform in US, EU and UK
  • Focus today
  • – last year: reaching agreement on Basle 3 – banking regulation
  • – Systemically important financial institutions – work ongoing. Debate: should SIFIs have to have additional capital? A tax on them? Resolution mechanisms well spelled out? Special arrangements for supervision?
  • – Shadow banking – how to define it, who takes the risk, supervision etc
  • – Derivatives market – pushing to over the counter and having better central party mechanisms
  • – Macroprudential regulation – falls between FSB and IMF
  • – Convergence on strengthened financial standards – governance arrangements; ensuring it leads to better financial management. Mark to market – tends to be procyclical
  • – Peer reviews of FSB countries
  • – Compensation – Europeans have been much more forceful than the US on tackling this.
  • 2 Fundamental problems for FSB
  • – Openness
  • – Inclusion – to become what it aspires to become, it has to be a universal organisation
  • Missed the final presentations