## Box 1. Functions of the FSB ## Source details **Canonical URL:** [Box 1. Functions of the FSB](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2013/_022213.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2013/_022213.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2013/_022213.pdf.json) --- ### Objective (Article 1) - The FSB Charter objective (Article 1): - The FSB is established “to coordinate at the international level the work of national financial authorities and international standard setting bodies (SSBs) in order to develop and promote the implementation of effective regulatory, supervisory and other financial sector policies. In collaboration with the international financial institutions, the FSB will address vulnerabilities affecting financial systems in the interest of global financial stability.” ### Tasks (Article 2) - The FSB’s tasks (Article 2) are to: - assess vulnerabilities affecting the global financial system and identify and review on a timely and ongoing basis within a macroprudential perspective, the regulatory, supervisory and related actions needed to address them, and their outcomes; - promote coordination and information exchange among authorities responsible for financial stability; - 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 and coordinate the policy development work of the international 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; - support contingency planning for cross-border crisis management, particularly with respect to systemically important firms; - collaborate with the Fund to conduct Early Warning Exercises; - promote member jurisdictions’ implementation of agreed commitments, standards and policy recommendations through monitoring of implementation, peer review and disclosure; and undertake any other tasks agreed by its Members in the course of its activities and within the framework of the Charter. *Source: _022213 - Box 1. Functions of the FSB (PDF chapter/section).* ### Appendix IV. ### Background and High-Level Working Group Recommendations - High-Level Working Group recommendations (summary): - "The FSB considers a treaty-based inter-governmental organization not to be an appropriate legal form at this juncture." - For legal personality, "creating an association under Swiss law would be an appropriate option. Appropriate Articles of Association should be formulated for this purpose, the draft of which is under review that will recognize that policy making activities will continue to be governed by the Charter." - "The FSB should adopt a gradual approach towards its institutionalization and, at this stage obtain the needed immunities by operating as an association under the BIS Headquarters Agreement. However, the FSB should evaluate towards the end of a period of five years, in light of experience and needs at that time, whether to vest the FSB with specific immunities and privileges by negotiating a separate HQA with Swiss authorities or go beyond this." - "The FSB should not introduce a membership fee at this stage for augmenting the resource pool of the FSB. Instead, it should continue to rely on the BIS for its entire funding as well as other support-service needs, through an appropriate agreement with the BIS. On the expiration of the service agreement, the FSB could, however, consider introduction of a membership fee." - "Once established as an association under Swiss law, the FSB should conclude a multiyear service agreement with the BIS that regulates the provision of financial and service support by the BIS, to provide continuity and greater planning certainty both for the FSB and the BIS." - "The FSB and the BIS have agreed to develop a multi-year service agreement, which will be finalized in the course of implementation of the recommendation." - Implementation and endorsement: - "The FSB Plenary adopted the working group’s recommendations in May 2012, and the recommendations were endorsed by G-20 Leaders at the Los Cabos Summit in June 2012." ### Establishment of the FSB Association and Articles of Association - Key implementation steps and dates: - "On January 28, 2013, the FSB was formally established as an association under Swiss law domiciled in Basel, Switzerland." - "The FSB Secretariat will continue to be based in the headquarters of the BIS." - "Pursuant to a multi-year services agreement, the BIS will provide the FSB with all of its funding and most of its personnel." - Features of the FSB Articles of Association: - Purpose: - The Association's purpose is "to promote international financial stability." It is given the purpose "to further the objectives stipulated in the FSB Charter in its respective current version" (Article 2). - Membership categories (Article 3) mirror the FSB Charter and include: - (a) "authorities from jurisdictions that are responsible for maintaining financial stability, such as ministries of finance, central banks, and supervisory and regulatory authorities;" - (b) "international financial institutions, including the Fund, the World Bank, the OECD, and the BIS;" - (c) "international standard setting, regulatory, supervisory and central bank bodies, including the Basel Committee on Banking Supervision (BCBS), the Committee on Payment and Settlement Systems (CPSS), the Committee on the Global Financial System (CGFS), the International Accounting Standards Board (IASB), the International Association of Insurance Supervisors (IAIS), and the International Organization of Securities Commissions (IOSCO)." - Governance (Articles 4-5): - The governance framework "consists of (i) a Plenary and (ii) an Executive." - "The Plenary is the Association’s sole decision-making body and consists of representatives of all members of the Association and is presided over by the Chair of the FSB." - "The Executive of the FSB is comprised of the Chair of the FSB and the Secretary General who are authorized to represent the Association in its dealing with third parties." - "The Executive can only legally commit the Association with the approval of the Plenary." - Decision-making: - "The Plenary takes all decisions by 'consensus' which is not defined in the Articles." The Secretariat clarified that "in the absence of a formal definition of consensus, decisions will continue to be taken and a consensus reached using the same approach that has been used in the past." - Legal status and immunities: - Although "a domestically-incorporated association subject to Swiss law," the FSB intends to "operate under the privileges and immunities of the BIS in Switzerland." - The FSB considered but "decided not to pursue" a separate headquarters agreement with Swiss authorities to secure privileges and immunities. ### Changes to the FSB Charter and Mandate - Revised Charter objectives and scope: - The revised FSB Charter "seeks to strengthen the FSB’s role in coordinating international standard setting and in monitoring the implementation of agreed policies and international standards at the national level." - Expanded mandate includes: - "(i) coordination of the policy development work of international standard setting bodies;" - "(ii) promoting member jurisdictions’ implementation of agreed commitments, standards, and policy recommendations through monitoring of implementation, peer review, and disclosure;" - "(iii) addressing regulatory gaps that pose a risk to financial stability by developing or coordinating the development of standards and principles, in collaboration with standard setting bodies, in areas that do not fall within the functional domain of another international standard setting body, or on issues that have cross sectoral implications." - Relationship with the Fund: - The revised Charter "does not modify the relationship or existing roles and competencies as between the Fund and the FSB" and "the Charter is not intended to create any legal rights or obligations." ### Fund Membership: Legal Basis and Key Legal Implications - Legal basis for Fund membership: - As of February 13, 2013, "60 of the FSB’s 64 members had already accepted membership, and the remaining members were taking the steps necessary to do so." - Under Article IX, Section 2 of the Fund’s Articles, the Fund possesses "full juridical personality" and the capacity to contract and participate as a member; however, "for the Fund to accept membership, Executive Board approval is required." - Legal implications summarized: - Privileges and immunities: - "In its activities as a member of the Association, the Fund would continue to be protected by its own privileges and immunities under Swiss law." - The FSB Articles state that "membership in the Association shall not constitute a waiver of the sovereign immunity of any Member or the privileges and immunities of international financial institutions participating as Members provided for by their respective constitutive texts and as provided for under international and national law" (Article 9 (3)). - Liability risk: - Corporate law principles mean "the actions of a corporation generally may give rise to liability for the corporation itself but not its members." - The FSB Articles "explicitly provide that the liability of the Association is limited to the extent of its own assets and members and their representatives shall not be responsible for the liabilities of the Association (Article 9)." - Protection of Fund employees: - "Fund employees who participate on behalf of the Fund in the activities of the FSB would be protected by the Fund’s privileges and immunities." - Binding effect of Association decisions: - Plenary administrative decisions (e.g., "appointment of the Executive and external auditors for the annual financial statements") "will legally bind the Association in its relations with third parties" but "would not, in themselves, give rise to legal obligations for members." - Plenary policy decisions "are not legally binding on members." Article 10 provides that "the policy making and related activities of the Association shall be governed by the FSB Charter" and "these activities, including any decisions reached in their context, shall not be binding or give rise to any legal rights or obligations under the present Articles." - The FSB Articles (Article 3 (3) and Article 10) specify that "members participate in the Association in accordance with their respective legal and policy frameworks, which may not be modified or superseded by these Articles or any decision of the Association" and that "members can recuse themselves at any time from ... activities or decision-making where such activities or decision-making are not consistent with their legal or policy frameworks." - Policy participation and dissent: - "The Fund would retain the right not to participate in or be bound by any policy making or related activities that the Fund considers inconsistent with the Fund’s legal or policy framework, and it could do so at any time in the process." - "There is nothing in the FSB’s new institutional framework that would preclude the Fund from publicly objecting to a decision adopted by the Plenary that is inconsistent with the Fund’s own policies." ### Operational and Financial Implications for the Fund - Operational implications: - "The FSB’s new legal framework is not expected to lead to significant changes in the FSB’s work processes or its interactions with its members." - Fund practice to date and proposed continuity: - Since 2010, "Fund participation in FSB activities has remained within the control of Fund management." - Management "has delegated Fund representation in the Plenary and relevant FSB committees to staff." - "Procedures are in place for the Financial Counsellor to informally brief the Executive Board on the Fund’s activities in the FSB on a periodic basis." - It is proposed that "management would continue to guide Fund participation in the FSB’s activities and staff would continue to report to the Executive Board on the Fund’s work in the Association." - Financial implications: - Membership financial obligations: - "Membership in the Association would not require any financial contribution from the Fund." - "The FSB Articles do not impose any obligation on members to make financial contributions to the Association. Rather, they provide that the Association will be funded by voluntary contributions from members and by the BIS on the basis of a multi-year agreement." - "The Fund would not be held responsible for the liabilities of the Association." - Resource implications for Fund collaboration (ongoing costs): - Representative ongoing costs reflect: - "(i) staff participation in FSB meetings (plenary, committees, working groups, etc.), including travel; and (ii) the preparation of briefings and other substantive contributions to FSB working groups." - "Owing to the increased involvement of the FSB in delivering on the G20 financial regulatory reform agenda, these costs have grown since the FSB’s inception in FY 2010 to reach an estimated 3.5-4 .5 FTEs of staff time (plus associated travel costs of around US$200,000– US$250,000, in FY 2013), and could be expected to remain close to this level going forward." - These figures "include the costs associated with the one Fund staff seconded to the FSB—an arrangement that has been in place since the establishment of the FSF in 1999." ### Proposed Executive Board Decision and Understandings - Proposed Board action: - "The Fund’s acceptance of membership in the Financial Stability Board (the 'Association') is approved." - Understandings to guide Fund participation (to be noted in the Board decision and communicated to the FSB): - "(i) the Fund will participate in the Association in accordance with the Fund’s legal framework and policies," - "(ii) the Fund will reserve the right not to take part in, or be bound by, the decision-making of the Association on policy-making and related activities where such participation would not be consistent with the Fund’s legal or policy framework," - "(iii) if the Association reaches a decision on a policy-related matter, the Fund will only be prepared to support that decision to the extent that it is consistent with the Fund’s legal and policy framework." *Source: Appendix IV.* ### Box 1. Functions of the FSB ........................................................................................... ### Box 1. Functions of the FSB ### Objective (Article 1) - The FSB Charter specifies the FSB’s objectives and tasks. It states in Article 1 that the FSB is established “to coordinate at the international level the work of national financial authorities and international standard setting bodies (SSBs) in order to develop and promote the implementation of effective regulatory, supervisory and other financial sector policies. In collaboration with the international financial institutions, the FSB will address vulnerabilities affecting financial systems in the interest of global financial stability.” ### Tasks (Article 2) The FSB’s tasks, set out in Article 2 of the Charter, are to: - assess vulnerabilities affecting the global financial system and identify and review on a timely and ongoing basis within a macroprudential perspective, the regulatory, supervisory and related actions needed to address them, and their outcomes; - promote coordination and information exchange among authorities responsible for financial stability; - 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 and coordinate the policy development work of the international 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; - support contingency planning for cross-border crisis management, particularly with respect to systemically important firms; - collaborate with the Fund to conduct Early Warning Exercises; - promote member jurisdictions’ implementation of agreed commitments, standards and policy recommendations through monitoring of implementation, peer review and disclosure; and undertake any other tasks agreed by its Members in the course of its activities and within the framework of the Charter. *Source: _022213 - Box 1. Functions of the FSB (PDF chapter/section).* ### Appendix IV. ### Appendix IV. ### Background and High-Level Working Group Recommendations - The High-Level Working Group on FSB Capacity, Resources, and Governance recommended: - "The FSB considers a treaty-based inter-governmental organization not to be an appropriate legal form at this juncture." - For legal personality, "creating an association under Swiss law would be an appropriate option. Appropriate Articles of Association should be formulated for this purpose, the draft of which is under review that will recognize that policy making activities will continue to be governed by the Charter." - "The FSB should adopt a gradual approach towards its institutionalization and, at this stage obtain the needed immunities by operating as an association under the BIS Headquarters Agreement. However, the FSB should evaluate towards the end of a period of five years, in light of experience and needs at that time, whether to vest the FSB with specific immunities and privileges by negotiating a separate HQA with Swiss authorities or go beyond this." - "The FSB should not introduce a membership fee at this stage for augmenting the resource pool of the FSB. Instead, it should continue to rely on the BIS for its entire funding as well as other support-service needs, through an appropriate agreement with the BIS. On the expiration of the service agreement, the FSB could, however, consider introduction of a membership fee." - "Once established as an association under Swiss law, the FSB should conclude a multiyear service agreement with the BIS that regulates the provision of financial and service support by the BIS, to provide continuity and greater planning certainty both for the FSB and the BIS." - "The FSB and the BIS have agreed to develop a multi-year service agreement, which will be finalized in the course of implementation of the recommendation." - "The FSB Plenary adopted the working group’s recommendations in May 2012, and the recommendations were endorsed by G-20 Leaders at the Los Cabos Summit in June 2012." ### Establishment of the FSB Association and Articles of Association - Key implementation steps and dates: - "On January 28, 2013, the FSB was formally established as an association under Swiss law domiciled in Basel, Switzerland." - "The FSB Secretariat will continue to be based in the headquarters of the BIS." - "Pursuant to a multi-year services agreement, the BIS will provide the FSB with all of its funding and most of its personnel." - Features of the FSB Articles of Association: - Purpose: the Association's purpose is "to promote international financial stability." It is given the purpose "to further the objectives stipulated in the FSB Charter in its respective current version" (Article 2). - Membership categories (Article 3) mirror the FSB Charter and include: - (a) "authorities from jurisdictions that are responsible for maintaining financial stability, such as ministries of finance, central banks, and supervisory and regulatory authorities;" - (b) "international financial institutions, including the Fund, the World Bank, the OECD, and the BIS;" - (c) "international standard setting, regulatory, supervisory and central bank bodies, including the Basel Committee on Banking Supervision (BCBS), the Committee on Payment and Settlement Systems (CPSS), the Committee on the Global Financial System (CGFS), the International Accounting Standards Board (IASB), the International Association of Insurance Supervisors (IAIS), and the International Organization of Securities Commissions (IOSCO)." - Governance (Articles 4-5): - The governance framework "consists of (i) a Plenary and (ii) an Executive." - "The Plenary is the Association’s sole decision-making body and consists of representatives of all members of the Association and is presided over by the Chair of the FSB." - "The Executive of the FSB is comprised of the Chair of the FSB and the Secretary General who are authorized to represent the Association in its dealing with third parties." - "The Executive can only legally commit the Association with the approval of the Plenary." - Decision-making: - "The Plenary takes all decisions by 'consensus' which is not defined in the Articles." The Secretariat clarified that "in the absence of a formal definition of consensus, decisions will continue to be taken and a consensus reached using the same approach that has been used in the past." - Legal status and immunities: - Although "a domestically-incorporated association subject to Swiss law," the FSB intends to "operate under the privileges and immunities of the BIS in Switzerland." - The FSB considered but "decided not to pursue" a separate headquarters agreement with Swiss authorities to secure privileges and immunities. ### Changes to the FSB Charter and Mandate - The revised FSB Charter "seeks to strengthen the FSB’s role in coordinating international standard setting and in monitoring the implementation of agreed policies and international standards at the national level." - Expanded mandate includes: - "(i) coordination of the policy development work of international standard setting bodies;" - "(ii) promoting member jurisdictions’ implementation of agreed commitments, standards, and policy recommendations through monitoring of implementation, peer review, and disclosure;" - "(iii) addressing regulatory gaps that pose a risk to financial stability by developing or coordinating the development of standards and principles, in collaboration with standard setting bodies, in areas that do not fall within the functional domain of another international standard setting body, or on issues that have cross sectoral implications." - The revised Charter "does not modify the relationship or existing roles and competencies as between the Fund and the FSB" and "the Charter is not intended to create any legal rights or obligations." ### Fund Membership: Legal Basis and Key Legal Implications - Legal basis for Fund membership: - As of February 13, 2013, "60 of the FSB’s 64 members had already accepted membership, and the remaining members were taking the steps necessary to do so." - Under Article IX, Section 2 of the Fund’s Articles, the Fund possesses "full juridical personality" and the capacity to contract and participate as a member; however, "for the Fund to accept membership, Executive Board approval is required." - Legal implications summarized: - Privileges and immunities: - "In its activities as a member of the Association, the Fund would continue to be protected by its own privileges and immunities under Swiss law." - The FSB Articles state that "membership in the Association shall not constitute a waiver of the sovereign immunity of any Member or the privileges and immunities of international financial institutions participating as Members provided for by their respective constitutive texts and as provided for under international and national law" (Article 9 (3)). - Liability risk: - Corporate law principles mean "the actions of a corporation generally may give rise to liability for the corporation itself but not its members." - The FSB Articles "explicitly provide that the liability of the Association is limited to the extent of its own assets and members and their representatives shall not be responsible for the liabilities of the Association (Article 9)." - Protection of Fund employees: - "Fund employees who participate on behalf of the Fund in the activities of the FSB would be protected by the Fund’s privileges and immunities." - Binding effect of Association decisions: - Plenary administrative decisions (e.g., "appointment of the Executive and external auditors for the annual financial statements") "will legally bind the Association in its relations with third parties" but "would not, in themselves, give rise to legal obligations for members." - Plenary policy decisions "are not legally binding on members." Article 10 provides that "the policy making and related activities of the Association shall be governed by the FSB Charter" and "these activities, including any decisions reached in their context, shall not be binding or give rise to any legal rights or obligations under the present Articles." - The FSB Articles (Article 3 (3) and Article 10) specify that "members participate in the Association in accordance with their respective legal and policy frameworks, which may not be modified or superseded by these Articles or any decision of the Association" and that "members can recuse themselves at any time from ... activities or decision-making where such activities or decision-making are not consistent with their legal or policy frameworks." - Policy participation and dissent: - "The Fund would retain the right not to participate in or be bound by any policy making or related activities that the Fund considers inconsistent with the Fund’s legal or policy framework, and it could do so at any time in the process." - "There is nothing in the FSB’s new institutional framework that would preclude the Fund from publicly objecting to a decision adopted by the Plenary that is inconsistent with the Fund’s own policies." ### Operational and Financial Implications for the Fund - Operational implications: - "The FSB’s new legal framework is not expected to lead to significant changes in the FSB’s work processes or its interactions with its members." - Fund practice to date and proposed continuity: - Since 2010, "Fund participation in FSB activities has remained within the control of Fund management." - Management "has delegated Fund representation in the Plenary and relevant FSB committees to staff." - "Procedures are in place for the Financial Counsellor to informally brief the Executive Board on the Fund’s activities in the FSB on a periodic basis." - It is proposed that "management would continue to guide Fund participation in the FSB’s activities and staff would continue to report to the Executive Board on the Fund’s work in the Association." - Financial implications: - Membership financial obligations: - "Membership in the Association would not require any financial contribution from the Fund." - "The FSB Articles do not impose any obligation on members to make financial contributions to the Association. Rather, they provide that the Association will be funded by voluntary contributions from members and by the BIS on the basis of a multi-year agreement." - "The Fund would not be held responsible for the liabilities of the Association." - Resource implications for Fund collaboration: - Representative ongoing costs reflect: - "(i) staff participation in FSB meetings (plenary, committees, working groups, etc.), including travel; and (ii) the preparation of briefings and other substantive contributions to FSB working groups." - "Owing to the increased involvement of the FSB in delivering on the G20 financial regulatory reform agenda, these costs have grown since the FSB’s inception in FY 2010 to reach an estimated 3.5-4 .5 FTEs of staff time (plus associated travel costs of around US$200,000– US$250,000, in FY 2013), and could be expected to remain close to this level going forward." - These figures "include the costs associated with the one Fund staff seconded to the FSB—an arrangement that has been in place since the establishment of the FSF in 1999." ### Proposed Executive Board Decision and Understandings - Proposed Board action: - "The Fund’s acceptance of membership in the Financial Stability Board (the 'Association') is approved." - Understandings to guide Fund participation (to be noted in the Board decision and communicated to the FSB): - "(i) the Fund will participate in the Association in accordance with the Fund’s legal framework and policies," - "(ii) the Fund will reserve the right not to take part in, or be bound by, the decision-making of the Association on policy-making and related activities where such participation would not be consistent with the Fund’s legal or policy framework," - "(iii) if the Association reaches a decision on a policy-related matter, the Fund will only be prepared to support that decision to the extent that it is consistent with the Fund’s legal and policy framework." *Source: Appendix IV.* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2013/_022213.pdf_