Financial Stability Board reports on Market Fragmentation
Financial Stability Board (FSB) has updated on its work on market fragmentation.
In its earlier update, in June 2019, the FSB had identified four key areas to address market fragmentation.
The areas are deference, pre-positioning of capital and liquidity, regulatory and supervisory coordination and information-sharing, and market fragmentation as part of the evaluation of reforms, starting with the FSB’s ongoing “too-big-to-fail” evaluation.
The International Organization of Securities Commissions (IOSCO), in a related report, had noted that the deference between regulators through the use of cross-border regulatory tools had increased significantly.
IOSCO proposed several measures to strengthen cooperation and thereby mitigate the risk of future fragmentation.
On pre-positioning of capital and liquidity, the FSB has taken a significant step through the: i) review of the technical implementation of the Total Loss-Absorbing Capacity Standard; and ii) a workshop on prepositioning and ring-fencing with external stakeholders.
The FSB has also proposed an upgraded regulatory, supervisory coordination and information-sharing between regulators to avoid future market fragmentation.
Finally, the FSB’s Too-Big-To-Fail (TBTF) evaluation examines the immense effects of TBTF reforms on the financial system, market fragmentation included.