Financial Stability Forum

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The Financial Stability Forum (FSF) is a group consisting of major national financial authorities such as finance ministries, central bankers, and international financial bodies. The Forum was founded in 1999 to promote international financial stability. Its founding resulted from discussions among Finance Ministers and Central Bank Governors of the G7 countries, and a study which they commissioned.[1]

The Forum facilitates discussion and co-operation in supervision and surveillance of financial institutions, transactions and events. FSF is managed by a small secretariat housed at the Bank for International Settlements in Basel, Switzerland.[2]

It is chaired by Mario Draghi, an Italian banker and economist who became the governor of the Bank of Italy in January 2006 for a six-year term.

The FSF membership includes about a dozen nations who participate through their central banks, financial ministries and departments, and securities regulators, including (in descending economic size): the United States, Japan, Germany, the United Kingdom, France, Italy, Canada, Australia, the Netherlands and some other industrialized economies.[3]

It also includes several international economic organizations.[4]

At the G20 summit on 15 November 2008 it was agreed that the membership of the FSF will be expanded to include emerging economies, such as China.

According to a press release dated March 12th 2009. FSF decides to broaden its membership. Therefore FSF will invite all members of the G20 who are not currently member of FSF. This includes such countries as India, China, Indonesia, South Korea, etc.[5]

The 2009 G-20 London summit decided to establish a successor to the FSF, the Financial Stability Board.

Meetings and actions

The Financial Stability Forum met in Rome on 28-29 March 2008 in connection with the Bank for International Settlements. Members discussed current challenges in financial markets, and various policy options to address them from this point forward.[6]

At this meeting, the FSF discussed a report to be delivered to G7 Finance Ministers and Central Bank Governors in April 2008. It identifies key weaknesses underlying current financial turmoil, and recommends actions to improve market and institutional resilience. The FSF discussed work underway at the International Monetary Fund (IMF) and Organisation for Economic Co-operation and Development (OECD) with regard to sovereign wealth funds (SWFs). The IMF is working closely with SWFs to identify a set of voluntary best practice guidelines, and is focusing on the governance, institutional arrangements and transparency of SWFs.

On April 12, 2008 the FSF delivered a [7] to the G7 Finance Ministers which details out its recommendations for enhancing the resilience of the financial markets and financial institutions. These are in five areas:

  • Strengthened prudential oversight of capital, liquidity and risk management
  • Enhancing transparency and valuation
  • Changes in the role and uses of credit ratings
  • Strengthening the authorities' responsiveness to risks
  • Robust arrangements for dealing with stress in the financial system [8]

References

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