Financial stability for a sustainable and inclusive global economy
Recent Financial Stability Board initiatives in digital innovation and environmental sustainability underscore the effectiveness of global cooperation, yet building resilience remains an ongoing task
Brazil’s 2024 G20 presidency has advanced various initiatives on sustainable development, inclusive growth and economic resilience under the theme of ‘Building a Just World and a Sustainable Planet’. Global financial stability is a crucial prerequisite for achieving these goals. As part of its mission to promote global financial stability, assigned by the G20, the Financial Stability Board has played a pivotal role in supporting key initiatives under the Brazilian G20 presidency. The FSB’s work on digital innovation and environmental sustainability shows the role it plays in facilitating
global cooperation to address key developments affecting the financial system.
Cross-border payments and digital innovation
Cross-border payments lie at the heart of international trade and economic activity. Historically, they have suffered from high costs, low speed, limited access and insufficient transparency. These issues are particularly burdensome for emerging market and developing economies.
Since G20 leaders endorsed the Roadmap for Enhancing Cross-border Payments in 2020, much has been done to support progress towards its ambitious goal of cheaper, faster, more transparent and more accessible cross-border payments services. This year, the FSB has identified ways to promote greater alignment in data frameworks and explored how to level the playing field for banks and non-bank payment service providers. These efforts address fundamental challenges that the banking and payment systems face in achieving the G20’s goals.
This work is part of a broader FSB agenda to harness the promise of technology while mitigating risks to financial stability. Ensuring that digital innovation in finance remains safe is crucial for both people and businesses.
The FSB is addressing the potential risks on multiple fronts, from cyber threats to crypto-assets and artificial intelligence. The FSB is currently consulting on the design of a format for incident reporting exchange to promote greater convergence in firms’ reporting of cyber and operational incidents to financial authorities. This helps authorities better monitor operational disruptions and firms to respond to and recover from such disruptions quickly.
The FSB has also delivered a status report on the implementation of its global regulatory framework for crypto-asset activities. Additionally, the FSB is monitoring developments in artificial intelligence and their implications for the financial sector and financial stability. While the risks are not immediate, ongoing vigilance is essential due to this technology’s potential to transform the financial sector.
Climate change and environmental sustainability
The FSB has been proactive in addressing climate-related risks in finance, establishing the Task Force on Climate-Related Financial Disclosures in 2015. The TCFD laid the foundations for the 2023 disclosure standards set by the International Sustainability Standards Board, which will strengthen the comparability, consistency and usefulness of climate-related financial disclosures globally.
The FSB is monitoring progress on implementation of market disclosures, in coordination with the ISSB, the International Organization of Securities Commissions and others. This progress, which will be reported to the G20, is central to the FSB Roadmap for Addressing Climate-Related Financial Risks.
Earlier this year at the request of the G20, the FSB conducted a stocktake of regulators’ and supervisors’ initiatives to identify and assess nature-related financial risks. The report contributes to international discussions on whether – and how – nature degradation, such as biodiversity loss, is a relevant financial risk.
The continued need for cooperation
A stable financial system is crucial for fostering inclusive and sustainable growth. It ensures that individuals and businesses have consistent access to credit and financial services through good times and bad, thereby enabling sustained investment in human and physical capital.
Financial stability also equips the economy to withstand shocks and stresses, which can impede growth. A resilient financial system can absorb these shocks without causing widespread economic hardship or diverting resources from long-term priorities such as sustainable development. But financial stability cannot be taken for granted. Building resilience is an ongoing task, particularly amid the financial system changes discussed above, and others such as the growing importance of non-bank financial intermediation.
In a deeply interconnected financial system, building resilience depends crucially on authorities working together across borders and sectors to identify and address vulnerabilities. The FSB was created by the G20 in the aftermath of the 2008 financial crisis to coordinate work to do just that. It brings together national authorities, international organisations and standard-setting bodies to work towards the common goal of international financial stability. This is a goal that is indispensable to the G20’s ambition of strong, sustainable, balanced and inclusive growth.
