New global watchdog sees improving macroeconomy, corporate bond markets

MANILA, Philippines – The Financial Stability Board (FSB) held its inaugural meeting in Basel last month, noting signs of improvement in the global macroeconomic outlook and in some financial markets, especially funding markets.

It likewise said that banks have raised capital from the private sector, but the process of restructuring and strengthening bank balance sheets is not yet completed.

“Corporate bond markets continue to see strong primary issuance, but other credit channels, including bank lending and securitization, will need to be strengthened in order to support a sustained recovery,” it said in a press statement.

The forum however said that it is important for authorities to follow through in implementing policies to resolve problems in financial systems and strengthen systemic resilience, so that the recent positive signs can be translated into sustainable growth.

The FSB agreed on the need to develop and consult with each other on plans for exit strategies from the financial system policies put in place in response to the crisis, although these should only be implemented once conditions are suitable.

The body took stock of progress in implementing FSF/FSB and G20 recommendations.

These include work on strengthening international accounting standards; developing a macro-prudential approach to financial supervision and regulation; reviewing the scope of financial regulation, including oversight for hedge funds and credit rating agencies (CRAs); enhancing adherence to international supervisory and regulatory standards; supervisory colleges; cross-border crisis management; and sound compensation practices.

The FSB is an international body allied with the Bank of International Settlement (BIS), widely recognized as the central bank of the world’s central banks. It was formed to deal with the ongoing global financial crisis.

Its members come from the BIS, national central banks, heads of national finance ministries or departments, and some representatives of the private sector.

Its mandate is to assess vulnerabilities affecting the financial system; identify and oversee action needed to address them; promote coordination and information exchange among authorities responsible for financial stability; monitor and advise on market developments and their implications for regulatory policy; advise on and monitor best practice in meeting regulatory standards; and, undertake joint strategic reviews of the policy development work of the international standards setting bodies.

The body is likewise expected to set guidelines for and support the establishment of supervisory colleges; manage contingency planning for cross-border crisis management; and, collaborate with the International Monetary Fund (IMF) to conduct early warning exercises.–Philippine Star