Strengthening the Stabilizers
PARIS – The G-20 summit in Cannes in early November is a major opportunity to address the mandate, governance, and institutional capacity of the Financial Stability Board, the international body that monitors, and makes recommendations about enhancing, the international financial system. The meeting is particularly timely, because the FSB will soon be under new leadership, as its current chairman, Mario Draghi, takes over in November as President of the European Central Bank.
In the midst of the financial meltdown in 2008-2009, the G-20 established the FSB, building on its predecessor, the Financial Stability Forum, and charged it with coordinating urgent international regulatory-reform efforts to ensure greater financial stability and global consistency of rules. Even as the G-20 wrestles with the challenges of the global economic slowdown and the euro crisis, the mandate to the FSB remains central to a substantial financial-reform agenda – and to avoiding national and regional divergence in areas critical to the global financial system’s stability.
The FSB has been criticized for lacking enforcement capability. But, in today’s world of sovereign states, treaties creating new international institutions with supranational powers are not realistic alternatives. Moreover, the FSB’s achievements are significant. Its agenda is rapidly expanding, and it is becoming an influential and permanent component of the international economic and financial architecture, even as challenging questions surround its future.