In a letter to G20 leaders meeting in Hamberg this week, Chair of the Financial Stability Board Mark Carney has outlined the areas where more needs to be done to improve financial stability.

In anticipation of the G20 leaders meeting today in Hamburg, Germany, the Financial Stability Board (FSB), which coordinates national financial authorities at a global level, this week published a progress report for G20 Leaders on its plan to reduce misconduct in the financial sector, along with a letter from its Chair Mark Carney outlining progress in financial regulatory reforms.

Eight areas where focus is needed

In his letter to G20 leaders, Carney states that progress has been made towards “building a safer, simpler, fairer financial system” but that more needs to be done in the following areas:

1. completion of Basel III and thorough implementation;
2. further implementation of effective cross-border resolution regimes;
3. improved transparency in OTC derivatives markets, through trade reporting;
4. bolstering individual responsibility and accountability;
5. better aligning incentives and rewards;
6. monitor financial stability issues raised by fintech;
7. address the decline in correspondent banking relationships that can threaten financial inclusion; and
8. work done by the Task Force on Climate-related Financial Disclosures to promote and monitor adoption of its recommendations.

Avoiding past mistakes not 'recipe for success'

Mr Carney said in a press conference earlier this week that G20 leaders should beware of the risks of complacency and that there will be new risks that evolve and come out of the financial system in future. He warned that the approach to building a safer, more stable financial system will not only involve addressing the risks that led to the last financial crisis, saying: “Just avoiding the repeat of past failures is not a recipe for success. The financial system evolved since 2007, and the G20’s response must adapt accordingly. The FSB will continue to scan the horizon to identify, assess and address new and emerging risks to financial stability.”