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p. 8 of 58 BACK | NEXT Purpose and Structure of the Toolkit Part One: Introduction and Overview I. The Financial Sector: An Overview II. International Financial Standards and Standard-Setting Organizations A. Coordination of International Regulatory Standards B. Standard-Setting and Standard-Setting Organizations C. Compendium of Standards D. G20 Summit Communique (April 2009) III. Implementation and Monitoring Part Two: Preconditions and Infrastructure for Financial Sector Development Part Three: Financial Regulation and Supervision Part Four: Regional Financial Integration Part Five: ADB's Intervention in the Financial Sector Bibliography Glossary and List of Abbreviations Acknowledgements

Financial Sector Legal and Regulatory Toolkit : Part One: Introduction and Overview : II. International Financial Standards and Standard-Setting Organizations

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A. Coordination of International Regulatory Standards

The FSB and the Bank for International Settlements (BIS) currently serve the key role in coordination of the process of standard-setting.

The newly reconstituted Financial Stability Board held its first meeting on June 26-27, 2009.

The purposes of the FSB are to:

• Promote international financial stability.
• Improve the functioning of markets.
• Reduce systemic risk through enhanced information exchange and international cooperation in financial market supervision and surveillance.
• Monitor and advise on market developments and their implications for regulatory policy.
• Advise on and monitor best practice in meeting regulatory standards.
• Undertake joint strategic reviews of the policy development work of the international SSBs (Standard Setting Bodies) to ensure their work is timely, coordinated, focused on priorities and addressing gaps.
• Set guidelines for and support the establishment of supervisory colleges.
• Manage contingency planning for cross-border crisis management, particularly with respect to systemically important firms.
• Collaborate with the IMF to conduct Early Warning Exercises.

The BIS plays an important role in coordination, including acting as the secretariat for the FSF, as well as the Basel Committee, Committee on Payment and Settlement Systems (CPSS), Committee on the Global Financial System (CGFS), G-10, International Association of Insurance Supervisors (IAIS), and International Association of Deposit Insurers (IADI).

It is worth that in April 2008, FSF the predesessor of FSB released 'Report of the Financial Stability Forum on Enhancing Market and Institutional Resilience' which would in many ways be overshadowed by subsequent events and by the November G-20 Declaration. The toolkit will still refer to FSF when discussing policies and documents issued before FSF was reconstituted as FSB.

In this report, the FSF focused on regulatory reforms in five main areas, namely (1) prudential oversight, especially capital, liquidity and risk management; (2) transparency and valuation; (3) role and uses of credit ratings; (4) authorities' responsiveness; and (5) arrangements for dealing with financial stress. Within these five areas, seven issues received the most attention: (1) risk disclosures of the exposures and financial condition of individual financial institutions; (2) a direction to the International Accounting Standards Board (IASB) to address off-balance sheet treatment and valuation of complex securities; (3) changes to the Basel Committee on Banking Supervision's Basel II capital accord, especially to address treatment of securitization and off-balance sheet activities; (4) new standards for liquidity; (5) attention to use of credit ratings and regulation of credit ratings agencies through the International Organization of Securities Commission (IOSCO), the Joint Forum on Financial Conglomerates and domestic regulators; (6) development of supervisory colleges for financial institutions; and (7) in respect to OTC derivatives, developing a CDS clearing house, including bilateral and multilateral netting mechanisms, systems to address defaults and mechanisms for trading and settlement automation.

In October 2008, the FSF in the context of the G-7 and IMF / World Bank annual meetings released a second report which extended its attention to four new areas: (1) international interaction and consistency of emergency arrangements and responses (an issue which had clearly become important by this time); (2) mitigation of pro-cyclicality, including in the context of capital, loan-loss provisioning, compensation and valuation / leverage; (3) addressing the scope of financial regulation to emphasize currently unregulated aspects; and (4) better integrate macroeconomic oversight and prudential supervision.

While significant in terms of content, this report was subsequently largely subsumed in the November 2008 G-20 statement.

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