On May 25, 2016, the Financial Stability Board published its thematic review on the implementation of the FSB Framework for Shadow Banking Entities. The objective of the review was to evaluate the progress made by FSB jurisdictions in implementing the FSB's Policy Framework, in particular, evaluating efforts by entities based on economic functions and participation in the FSB information-sharing exercise. The FSB found that, despite progress having been made, the peer review findings indicated that implementation remains at a relatively early stage. The FSB concluded that more work is required to ensure that application of the Framework is sufficiently rigorous and that jurisdictions are able comprehensively to assess and respond to risks potentially posed by non-bank financial entities.
The FSB made two recommendations based on its findings. Firstly, jurisdictions should fully implement the policy framework and suggested actions to assist in implementation. For example, jurisdictions should establish a systematic process involving all relevant domestic authorities to assess the shadow banking risks posed by non-bank financial entities or activities and also address identified gaps in the availability of data by increasing information-collection powers.
Secondly, the FSB suggested a range of actions that it will take to facilitate the effective implementation of the Policy Framework. The FSB stated that it would, amongst other things, starting with its 2016 information-sharing exercise, strengthen the process of discussion and review as part of the information-sharing exercise to assist jurisdictions to learn from and enhance consistency in economic classification and risk assessment.
The thematic review is available at: http://www.fsb.org/wp-content/uploads/Shadow-banking-peer-review.pdf.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
