Banking and Finance

Issue 1156 / 21 April 2022

Financial Stability Board

Russian invasion of Ukraine - FSB publishes letter from Chair to G20 finance ministers and central bank governors - 20 April 2022

The Financial Stability Board (FSB) has published a letter from its Chair, Klass Knot, to G20 finance ministers and central bank governors ahead of their meeting in Washington on 20 April 2022. The letter discusses the current outlook for financial stability in light of Russia’s invasion of Ukraine and sets out the FSB’s plans over the coming months to assess and address emerging vulnerabilities.

The FSB notes that, so far, the direct global financial stability impact of the war in Ukraine appears limited compared to that at the start of COVID-19 in March 2020. However, it cautions that uncertainty about the potential future economic and financial market impacts of the war in Ukraine remains high, and that associated highly volatile commodity prices and upward pressure on inflation and interest rates are creating headwinds for global economic recover. The FSB highlights the following key areas of concern:

  • linkages between commodity markets and the rest of the financial system;
  • commodities derivatives markets;
  • developing a comprehensive picture of leverage in the financial system;
  • cyber response and recovery capabilities; and
  • vulnerabilities in emerging markets related to external financing.

In light of these concerns, the FSB highlights that it is responding to the current financial stability challenges in two main ways, through: (i) intensified monitoring of current market developments and emerging vulnerabilities, with a focus on the resilience of critical ‘nodes’ in the global financial system; and (ii) in-depth analysis and assessment of specific potential vulnerabilities, with a particular focus on commodity markets, margining and leverage.

The FSB also notes the ‘intense debate about current and future energy policies in many jurisdictions, which demonstrate that financial risks related to climate change are not just a long-term issue or tail event. The FSB highlights its Roadmap for Addressing Climate-related Financial Risks’ and indicates that an interim report on supervisory and regulatory approaches to addressing climate-related financial risks will be published for consultation later in April 2022. It welcomes the International Sustainability Standards Board’s exposure draft for consultation on climate-related reporting standards as a major step towards establishing a global baseline standard for corporate climate disclosures.

Finally, the letter notes that current financial stability challenges reinforce the importance and increase the urgency of the FSB’s ongoing policy work in a number of areas, including strengthening the resilience of non-bank financial intermediation, cryptoassets and cyber risks. On the role of non-bank participants in commodity markets, the FSB plans to deliver a comprehensive progress report on the initiatives under the non-bank financial intermediation (NBFI) work programme to the G20 Summit in October 2022. This will include a report on the main findings of relevant FSB and standard-setting body initiatives and on policy proposals to address systemic risk in NBFI. On cryptoassets, the FSB is taking forward, in collaboration with standard-setting bodies including the Financial Action Task Force, work on the regulation and supervision of unbacked cryptoassets and stablecoins. It is also analysing the financial stability impacts of rapidly evolving decentralised finance to promote safe innovation.

FSB letter from Chair, Klaas Knot: To G20 Finance Ministers and Central Bank Governors


Press release

European Commission

CRR - Implementing Regulation amending ITS regarding institutions’ disclosures on interest rate risk exposures published in OJ - 19 April 2022

Commission Implementing Regulation (EU) 2022/631 has been published in the Official Journal of the European Union. This amends the implementing technical standards laid down in Commission Implementing Regulation (EU) 2021/637 in relation to Pillar 3 disclosures regarding exposures to interest rate risk on positions not held in the trading book (IRRBB).

The Implementing Regulation amends the Commission Implementing Regulation 2021/637 by adding a new Article 16a and Annexes, which seek to ensure that institutions disclose comprehensive and comparable information on IRRBB through the provision of a table and a template containing quantitative information on interest rate risks of non-trading book activities.

The Commission Implementing Regulation enters into force on 9 May 2022.

Commission Implementing Regulation of 13 April 2022 amending the implementing technical standards laid down in Implementing Regulation (EU) 2021/637 as regards the exposures to interest rate risk on positions not held in the trading book

Council of the European Union

Covered bonds - Council of the EU publishes Corrigendum to Delegated Regulation amending Commission Delegated Regulation on LCR - 14 April 2022

The Council of the EU (the Council) has published a Corrigendum to a draft Commission Delegated Regulation (Amending Regulation) that amends Commission Delegated Regulation ((EU) 2015/61) on the liquidity coverage ratio (LCR). The Amending Regulation was adopted by the European Commission in February 2022, and seeks to incorporate requirements introduced by the Covered Bond Directive ((EU) 2019/2162).

An accompanying explanatory memorandum states that Corrigendum corrects an error in the text of the Amending Regulation, which was identified during the Council and the European Parliament’s three-month scrutiny period. It aims to delete the word “covered” from the last sentence of recital 5 to make it clear that all types of bonds issued by official export credit agencies should be treated as high quality liquid assets (HQLA).

Since the Amending Regulation has not yet been published in the Official Journal of the European Union (OJ), providing the Corrigendum is adopted within the scrutiny period, the correction could be incorporated directly in the final act that will be published in the OJ.

If the Council and the European Parliament have no objections, the Amending Regulation will apply from 8 July 2022.

Corrigendum to Commission Delegated Regulation of 10 February 2022 amending Commission Delegated Regulation (EU) 2015/61 to supplement Regulation (EU) No 575/2013 of the European Parliament and the Council with regard to liquidity coverage requirement for credit institutions (C(2022)722)

European Central Bank

TARGET2 - ECB adopts repealing Guideline and Decision - 20 April 2022

The European Central Bank (ECB) has adopted a repealing Guideline (ECB/2022/8), dated 24 February 2022, on a new generation Trans-European Automated Real-time Gross Settlement Express Transfer system (TARGET) and which repeals Guideline ECB/2012/27. The ECB has also adopted a Decision (ECB/2022/22), dated 19 April 2022, concerning the terms and conditions of TARGET-ECB which repeals Decision ECB/2007/7.

The ECB’s implementation of its project to consolidate various technical and functional elements of TARGET2 and TARGET2-Securities is scheduled for 21 November 2022. Guideline ECB/2012/27 governs TARGET2 and has therefore been repealed and replaced by Guideline ECB/2022/8. The national central banks of the EU member states whose currency is the euro must take the necessary measures to comply with ECB/2022/8 and apply it from 21 November 2022. They must also notify the ECB of texts and means relating to those measures by 19 April 2022. The Eurosystem central banks must comply with ECB/2022/8 from 21 November 2022.

In Decision ECB/2022/22, the ECB explains that, for reasons of legal certainty, it is appropriate to adopt a new Decision to implement the changes to the terms and conditions of TARGET2-ECB brought about by repealing Guideline ECB/2012/27. The Decision will enter into force on the fifth day following its publication in the Official Journal of the EU. It will apply from 21 November 2022.

Guideline (EU) [YYYY/[XX*]] of the European Central Bank of 24 February 2022 on a new-generation Trans-European Automated Real-time Gross Settlement Express Transfer system (TARGET) and repealing Guideline ECB/2012/27 (ECB/2022/8)

Decision (EU) [YYYY/[XX]] of the European Central Bank of 19 April 2022 concerning the terms and conditions of TARGET-ECB and repealing Decision ECB/2007/7 (ECB/2022/22)