The Financial Stability Board (FSB) was established in April 2009 as the successor to the Financial Stability Forum (FSF).
The Group of Twenty (G20) endorsed the FSB’s original Charter of 25 September 2009 which set out the FSB’s objectives and mandate, and organisational structure. The FSB has assumed a key role in promoting the reform of international financial regulation. Policies agreed by the FSB are not legally binding, nor are they intended to replace the normal national and regional regulatory process. Instead, the FSB acts as a coordinating body, to drive forward the policy agenda to strengthen financial stability. It operates by moral suasion and peer pressure, to set internationally agreed policies and minimum standards that its members commit to implement at national level.
The FSB’s charter (as a not-for-profit association under Swiss law with its seat in Basel, Switzerland) reinforces certain elements of its mandate, including its role in standard setting and in promoting Members’ implementation of international standards and agreed G20 and FSB commitments and policy recommendations.
The FSF (first convened in April 1999 in Washington, DC) was designed to bring together:
- national authorities responsible for financial stability in significant international financial centres, namely treasuries, central banks, and supervisory agencies;
- sector-specific international groupings of regulators and supervisors engaged in developing standards and codes of good practice; international financial institutions charged with surveillance of domestic and international financial systems and monitoring and fostering implementation of standard;
- committees of central bank experts concerned with market infrastructure and functioning.
In November 2008, the Leaders of the G20 countries (G20 membership comprises a mix of the world’s largest advanced and emerging economies, representing about two-thirds of the world’s population, 85 per cent of global gross domestic product and over 75 per cent of global trade.) called for a larger membership of the FSF. A broad consensus emerged in the following months towards placing the FSF on stronger institutional ground with an expanded membership – to strengthen its effectiveness as a mechanism for national authorities, standard setting bodies and international financial institutions to address vulnerabilities and to develop and implement strong regulatory, supervisory and other policies in the interest of financial stability.
As announced in the G20 Leaders Summit of April 2009, the expanded FSF was re-established as the Financial Stability Board (FSB) with a broadened mandate to promote financial stability.