FSF issues recommendations and principles to boost financial systems at London G-20 Summit

Update on the Implementation of the April 2008 FSF Recommendations

The update on progress in implementing the recommendations of the April 2008 Report on Enhancing Market and Institutional Resilience covers actions in five areas: (i) strengthening capital, liquidity and risk management in the financial system; (ii) enhancing transparency and valuation; (iii) changing the role and uses of credit ratings; (iv) strengthening the authorities' responsiveness to risks; and (v) putting in place robust arrangements for dealing with stress in the financial system.

The report summarises progress since October 2008, when the FSF published a follow-up report reviewing progress until then. The FSF notes that implementation progress since October 2008 has been extensive. In particular: Banking supervisors have published proposals for improving risk capture under Basel II, especially with regard to credit-related risks in the trading book. They have also published revised capital charges for liquidity commitments to off-balance sheet entities and for the re-securitised instruments.

The BCBS published in January 2009 the standards for firm-wide risk management that supervisors will assess under Pillar 2 of the capital framework.

Central counterparty clearing for over-the-counter credit derivatives has been launched in the US and in Europe. Consistent guidance has been issued by the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) for fair valuation when markets are illiquid, and for the transfer of assets between valuation categories in rare circumstances. The IASB has also proposed revised standards for the consolidation and disclosure of off-balance sheet entities and related exposures. The IASB finalised in March 2009 an amendment to IFRS 7 setting forth enhancements to required risk and valuation disclosures for financial activities, including for complex financial instruments.

The 2008 revisions of the International Organization of Securities Commissions (IOSCO) Code of Conduct Fundamentals for Credit Rating Agencies have been substantially implemented by several rating agencies including the three largest ones. IOSCO has also developed a model examination module to be used by the authorities that regulate and inspect credit rating agencies. Supervisory colleges have been established for most of the financial institutions identified by the FSF and many of them held face-to-face meetings by end-2008.

The International Association of Deposit Insurers and the BCBS issued in March a set of Core Principles for Effective Deposit Insurance Systems.

Principles for Sound Compensation Practices ...Click Here

Principles for Cross-border Cooperation on Crisis Management...Click Here

Addressing procyclicality in the financial system...Click Here



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