FSB proposes eight principles to modernize financial rules
A rulebook that keeps getting checked
The big idea is to make modernization a habit. Regulators would keep asking whether their frameworks are doing what they were meant to do, or could be adjusted, strengthened or dropped. They would also consider matching requirements to each institution’s nature, size, complexity, risk profile, business model and systemic importance.
The other six ask regulators to zero in on material risks, run efficient supervision, keep regulation forward-looking, line up with other regulators at home, consult widely and weigh costs and benefits, and keep reporting demands efficient and proportionate. Supervisors adopting new technology would keep human oversight in place so the tools complement, not replace, their judgment.
The FSB also sets some ground rules. The principles must fit each jurisdiction’s laws and circumstances, and they aim to preserve or strengthen the financial system’s current resilience. “The proposed principles do not presume a specific outcome or call for greater or lesser stringency in regulatory and supervisory frameworks,” the report states.
OSFI’s reforms make the case-study list
Canada shows up four times in the report’s case studies, which the FSB calls illustrative rather than prescriptive. The first features the Capital Requirement Innovation initiative at the Office of the Superintendent of Financial Institutions (OSFI), an ongoing review of capital requirements that has produced targeted reforms, including changes to the maximum range for Canada’s Domestic Stability Buffer.
The second looks at security. According to the report, Canadian authorities spotted an increasing trend of foreign actors targeting financial institutions, exposing banks and insurers to integrity and security risks. In response, OSFI’s legal mandate was expanded, and OSFI has started reviewing its Supervisory Framework and Guides to Intervention.
