IMF, FSB Working Together on Identifying Systemic Risks

• Author: International Monetary Fund

After a conference organized by the IMF and the FSB in early July on the financial crisis and information gaps, IMF Survey online spoke with Ben Cohen of the FSB about his organization's new role and how both institutions are working together to identify risks and vulnerabilities.

IMF Survey online: The FSB replaced the Financial Stability Forum (FSF) this past April. What were the shortcomings of the Financial Stability Forum? And what will be new FSB be doing differently?

Cohen: The FSF was set up in 1999 in the aftermath of the Asian, Russian, and Brazilian crises. There was a realization that there needed to be more dialogue and more joint action among treasuries, central banks, and regulators from the major economies. It functioned pretty well through the years and it looked at a number of different issues.

After this current crisis broke, the FSF did a lot of work on developing recommendations and responses to strengthen the financial system and draw lessons from the crisis. It also came up with ways to strengthen different aspects of financial regulation and other financial policies.

Over the past year, however, there was a realization that for the FSF to be effective, it would need a larger membership and a stronger mandate. So, in April the FSF was expanded to include the remaining members of the Group of Twenty. That brought in the large emerging economies. The name of the FSF was also changed to the Financial Stability Board to move the grouping from being a consultative body to more of a coordinating body.

IMF Survey online: The global financial crisis has uncovered major information gaps. From the user's perspective, which are the most pressing data gaps arising from the crisis?

Cohen: We had a very productive conference because it brought together the people who are analyzing financial stability and financial stability risks at various central banks, treasuries, and other agencies around the world with the people who are in charge of developing statistics and coordinating the international production of statistics. So, I think both sides found it very useful.

The main data gaps that users pointed to were in the so-called shadow banking system. We know a lot about banks and about other regulated institutions, but we don't know enough about special investment vehicles, conduits, securitization markets and instruments, and about all of the financial intermediation that happens outside the traditional banking system. There was...