Financial Stability Board
Cryptoasset activities - FSB publishes statement on international regulation and supervision - 11 July 2022
The Financial Stability Board (FSB) has published a statement on international regulation and supervision of cryptoasset activities. The FSB notes that the recent turmoil in cryptoasset markets highlights their intrinsic volatility, structural vulnerabilities and the issue of their increasing interconnectedness with the traditional finance system. It also demonstrates the importance of progressing the FSB’s and the international standard-setting bodies’ ongoing work to address the potential financial stability risks posed by cryptoassets.
The FSB will report to the G20 Finance Ministers and Central Bank Governors in October 2022 on regulatory and supervisory approaches to stablecoins and other cryptoassets. At that meeting, the FSB will submit public consultation reports on:
- the review of the FSB’s high-level recommendations for the regulation, supervision and oversight of ‘global stablecoin’ arrangements, including how existing frameworks may be extended to close gaps and implement the recommendations; and
- proposed recommendations for promoting international consistency of regulatory and supervisory approaches to other cryptoassets and cryptoasset markets, and strengthening international cooperation and coordination.
FSB Statement on International Regulation and Supervision of Crypto-asset Activities
Webpage
Press release
Climate-related financial risks - FSB publishes progress report on roadmap - 14 July 2022
The Financial Stability Board has published a progress report (the Report) on its roadmap for addressing climate-related financial risks, which was initially published in July 2021. The Report provides a consolidated update on the progress made by standard-setting bodies and other international organisations across the roadmap’s four key blocks: (i) firm-level disclosures; (ii) data; (iii) vulnerabilities analysis; and (iv) regulatory and supervisory approaches.
The FSB notes that although encouraging progress has been made across all four blocks of the roadmap, understanding of the financial risks arising from climate change and the policy approaches needed to address them remains at an early stage. In light of this, the FSB recommends areas for future work, including further embedding climate-related risk into risk management and prudential regulatory frameworks, and incorporating regular monitoring and assessment of climate-related financial risks into overall financial risk monitoring conducted by authorities.
The FSB will continue to publish annual progress reports and submit them to the G20.
FSB Roadmap for Addressing Financial Risks from Climate Change: 2022 progress report
Updated webpage
Press release
UK Parliament
Cryptoassets - Treasury Committee launches inquiry - 13 July 2022
The House of Commons Treasury Committee (the Committee) has launched an inquiry exploring the role of cryptoassets in the UK. In particular, the inquiry will cover: the opportunities and risks that cryptoassets may bring to consumers, businesses and the government; the potential impact of distributed ledger technology on financial institutions, including the central bank, and financial infrastructure; and the regulatory response to cryptoassets. The Committee would welcome written evidence on a number of areas, including:
- the extent to which cryptoassets, when used as digital currencies, are likely to replace traditional currencies;
- the opportunities and risks of introducing a Bank of England Digital Currency;
- whether the government and regulators are suitably equipped to grasp the opportunities presented by cryptoassets, while also mitigating against the risks;
- how distributed ledger technology can be applied in the financial services sector;
- whether regulation could benefit cryptoasset start-ups by improving consumer trust and resilience; and
- the environmental and resource intensity of using cryptoasset technology.
The deadline for responses is 12 September 2022.
Call for Evidence: The crypto-asset industry
Webpage
Press release
HM Treasury
FCA Chair and Board members - Appointed by HM Treasury - 8 July 2022
HM Treasury has announced the appointment of Ashley Alder as Chair of the FCA for a five-year term. Mr Alder, who is currently the CEO of the Securities and Futures Commission of Hong Kong and who chairs the board of the International Organization of Securities Commissions (IOSCO), is expected to take up the role in January 2023 and will succeed interim chair, Richard Lloyd. HM Treasury has also announced the reappointments of Liam Coleman and Dr Alice Maynard to the FCA’s board, who respectively chair the FCA’s People and Audit Committees. Their second three-year terms as Non-Executive Directors will start on 5 November 2022.
HM Treasury press release
FCA press release
Financial Policy Committee
Climate change risks - FPC publishes speech - 11 July 2022
The Bank of England’s (the Bank’s) Financial Policy Committee (FPC) has published a speech delivered by Anil Kashyap, member of the FPC, discussing the FPC’s work to ensure that UK banks and insurers understand the risks they face from climate change. After giving an overview of the 2021 Climate Biennial Exploratory Scenario (CBES) results, which were published in May 2022, Mr Kashyap highlights questions that senior management should be asking in order to improve the way UK banks and insurers report climate risks, such as:
- How much extrapolation am I having to do because of missing data and how will we fill in these gaps?
- Which third parties am I reliant on and what are their key assumptions/features of their models?
- What is my firm best and worst at modelling and how will we level up our capability?
- What are they key assumptions my institution is making about the trajectory of climate policy and physical risk and its impact?
Overall, Mr Kashyap concludes that, “private sector firms have a big risk management problem regarding climate risk in front of them”. He urges supervisors to assess the size of the problem and work with industry to address it, and cautions that, “unless we make significant progress in the near term, we will encounter serious problems for the financial system in the long-term.”
FPC speech by Anil Kashyap: It’s the risk management, stupid!
Bank of England
Crypto winter - Bank of England publishes speech - 12 July 2022
The Bank of England has published a speech by Sir Jon Cunliffe on lessons from the recent instability and losses in crypto markets, dubbed by some the ‘crypto winter’.
Sir Jon identifies and elaborates on what he sees as four lessons from the episode:
- technology does not change the underlying risks in economics and finance;
- regulators should continue and accelerate their work to put in place effective regulation of the use of crypto technologies in finance;
- this regulation should be constructed on the iron principle of ‘same risk, same regulatory outcome’; and
- crypto-technologies offer the prospect of substantive innovation and improvement in finance, but to be successful and sustainable, innovation has to happen within a framework in which risks are managed.
Sir Jon highlights that innovators as well as regulators have an interest in the development of appropriate regulation and risk-management, so that the benefits of technological change can be secured with such a framework.
Speech by Jon Cunliffe
Financial Conduct Authority
Future of UK regulation - FCA publishes speech - 14 July 2022
The FCA has published a speech by Nikhil Rathi, the FCA’s CEO, on how the UK will regulate for the future.
In the speech, Mr Rathi focuses on proposals that will allow the FCA to operate as a “different type of regulator”, including investing in data and tech platforms, and adopting digitalisation more broadly through the cloud and case management analytics tools. Mr Rathi reflects on the challenges the FCA faces, emphasising the importance of enforcement cooperation between the FCA and US regulatory agencies.
Mr Rathi identifies three key areas of focus:
- crypto: Mr Rathi highlights the calls from its CryptoSprints participants for a regulatory regime for cryptoassets. He also notes the talks held between the UK and US as part of the US-UK Financial Innovation Partnership, where the parties agreed to deepen ties on financial innovation, including in relation to stablecoins and central bank digital currencies;
- ESG: the FCA recently published its response on ESG integration in capital markets and plans to release its Sustainability Disclosure Requirements later in 2022. Mr Rathi highlights the FCA’s support for regulating ESG data and ratings, and notes that it will support industry to develop and follow a ‘Voluntary Code of Conduct’ informed by the recommendations of the International Organization of Securities Commissions (IOSCO); and
- diversity and inclusion: Mr Rathi highlights the FCA’s April 2022 rules for listed companies requiring them to declare their diversity metrics against common targets on a ‘comply or explain’ basis, and notes that the FCA is continuing to consider further regulatory interventions.
FCA Speech by Nikhil Rathi: How the UK will regulate for the future
Financial Services Skills Commission
Inclusion measurement guide - FSSC publishes update - 14 July 2022
The Financial Services Skills Commission (the FSSC) (an independent, not for profit body) has published an update to its inclusion measurement guide (the Guide). The Guide aims to support and improve the measurement of inclusion across the financial services sector and was originally launched in October 2021.
The FSSC has updated the Guide to revise the survey questionnaire based on cognitive testing insights produced by the Financial Services Culture Board. It has also added a question on stereotyping as well as an updated list of demographic characteristics, which firms can use to strengthen their internal metrics. The FSSC explains that the updated Guide will help improve and standardise inclusion measurement across the financial services sector.
FSSC Inclusion measurement guide: Improving the measurement of inclusion across the financial services sector (updated)
Press release
