On 18 October 2011 the Financial Stability Board (“FSB”) published ‘A Coordination Framework for Monitoring the Implementation of Agreed G20/FSB Financial Reforms’ (the “Framework”).

The FSB is the body responsible for coordinating and promoting the monitoring of the implementation of G20 and FSB financial reforms, and for reporting back to the G20. In order to strengthen this monitoring, the FSB has established the Framework, which addresses what to monitor, how to monitor, who should monitor and to whom the information should be reported and disseminated.

In the accompanying press release the FSB explain that following the financial crisis they have “coordinated effectively with standard-setting bodies in developing the international regulatory policies that are critical for strengthening global financial stability”. However, the success of the reforms in the future will depend on full and globally consistent implementation, and it is important to monitor, assess and report back on this.

The Framework lists those priority areas in which consistent and comprehensive implementation is most critical for global financial stability. These areas are as follows:

  • The Basel II/II.5/III framework – in particular, putting in place the necessary regulations or legislation to implement the Basel III framework starting on 1 January 2013 so that it can be fully phased in by 1 January 2019;
  • Over-the-counter derivatives market reforms – in particular, implementing the recommendations concerning standardization, central clearing, exchange or electronic platform trading, and reporting of transactions to trade repositories by the end of 2012;
  • Compensation practices – in particular, the implementation of Principles for Sound Compensation Practices and Implementation Standards by the end of 2010;
  • Policy measures for global systematically important financial institutions (“G-SIFIs”) – in particular, an FSB Peer Review Council will review the full and consistent implementation of the G-SIFI measures;
  • Resolution frameworks – in particular, forming an international standard that will be subject to assessment processes; and
  • Shadow banking – in particular, carrying out more detailed work in 2012 to specify recommendations for strengthening the regulation and oversight of the shadow banking system.

These areas will be subject to more intensive monitoring and reports on implementation in each area will be published at least once a year. The priority areas will be reviewed annually in light of developments.

The Chairman of the FSB, Mario Draghi, commented that “[the] Framework is a key element of the FSB’s future work programme and comes at a crucial juncture as the reform process increasingly moves from global policy development to national implementation”.

The Framework can be viewed here.