In its flagship economic report, the Bank for International Settlements (BIS) said the global economy risks entering a new era of high inflation. Stagflation dangers loom large, as a combination of lingering disruptions from the pandemic, the war in Ukraine, soaring commodity prices and financial vulnerabilities cloud the outlook. According to the BIS’s Annual Economic Report 2022, the priority for central banks is to restore low and stable inflation. In doing so, they should seek to minimise the hit to economic activity, thereby safeguarding financial stability. Engineering such a “soft landing” has historically been difficult, and the starting conditions today make it challenging, the BIS said. Continue reading…

Two of the United Kingdom’s most senior ministers have resigned from the cabinet in the latest blow to Prime Minister Boris Johnson’s leadership. Health Minister Sajid Javid and Finance Minister Rishi Sunak announced their resignations within minutes of each other on Tuesday, plunging Johnson’s government into crisis. The resignations came as Johnson was apologising for what he said was a mistake for not realising that a former minister in charge of pastoral care was unsuitable for a job in government after complaints of sexual misconduct were made against him, in the latest embarrassment to have engulfed his government. In their resignation letters to the prime minister, both ministers took aim at Johnson’s ability to run an administration that adhered to standards. Continue reading…

Almost half of firms (44%) are planning to invest more in RegTech solutions in the next 12 months to cope with the growing pressure on the compliance function in this fast moving and increasingly complicated regulatory and operational landscape. A further 41% expect to invest the same amount as the previous 12 months. This investment is driving up the overall cost of compliance with almost all (90%) of financial services firms reporting increased compliance costs over the past five years. One in ten said costs have doubled. This was discovered by compliance technology and data analytics firm SteelEye, in its first-ever Annual Compliance Health Check Report. Continue reading…

On 30 June, the Basel Committee on Banking Supervision issued a second public consultation on the prudential treatment of banks’ cryptoasset exposures. The basic structure of the proposal in the first consultation is maintained, with cryptoassets divided into two broad groups: Group 1 includes those eligible for treatment under the existing Basel Framework with some modifications. Group 2 includes unbacked cryptoasset and stablecoins with ineffective stabilisation mechanisms, which are subject to a new conservative prudential treatment. Continue reading…

Debt financing can spur economic growth but may also pose risks to financial stability and macroeconomic performance. Private non-financial sector debt increased to an all-time high of around 170% of world GDP during the Covid-19 pandemic, spotlighting the role of debt in supporting economic activity as well as the associated risks. Central bank frameworks for monitoring debt vulnerabilities were strengthened in the years prior to the Covid-19 crisis. Central banks have made increasing use of sectoral and entity-level data to look beneath aggregate figures that might conceal vulnerabilities; the distribution’s tail often provides a better signal of debt vulnerabilities than the middle. Continue reading…

On 20 May 2022, Charles Randell, Chair of the Financial Conduct Authority, delivered a speech at the Centre for Commercial Law Studies, Queen Mary University of London, England. Meeting people across the nations and regions of the United Kingdom is the greatest privilege of my job as Chair of the Financial Conduct Authority. In Solihull, I met a single mother. When her father was dying, she gave up her job to care for him. She couldn’t meet her everyday costs and started taking on debt. She did seek help – but at her lowest ebb, she was sold a plan that charged her fees but didn’t reduce the debt. It didn’t even leave her enough money for food. It was only when she went to the voluntary sector – in her case, Christians Against Poverty – that she started to turn the corner. She got a new plan which meant she could keep her home. Continue reading…

The European Banking Authority (EBA) recently published its Guidelines specifying the role and responsibilities of the anti-money laundering and countering the financing of terrorism (AML/CFT) compliance officer and of the management body of credit or financial institutions. These Guidelines aim to ensure a common interpretation and adequate implementation of AML/CFT internal governance arrangements across the EU in line with the requirements of the EU Directive on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (ML/FT).  Continue reading…

A 22-year-old suspected of committing several terrorist and extremist crimes has been arrested in Slovakia. In an action supported by Eurojust, Europol and the United States, Slovak and Czech authorities searched two locations and seized a 3D printer and printed metal parts of weapons, computers and other electronic devices. According to the investigation, the arrested suspect is believed to sympathise and promote far-right white nationalist movements such as the neo-Nazi ‘alternative right’, the ideology of ‘accelerationism’ and the ‘Siege culture’. The suspect allegedly participated in several subversive and sabotage activities and acts of terrorism with the objective of publicly inciting the overthrow of the democratic political system. He shared photos of glorified far-right extremists to publicly support their activities. He also committed several extremist crimes. Continue reading…

The Financial Stability Board (FSB) and International Monetary Fund (IMF) has on 9 June published a report to mark the completion of the second phase of the G20 Data Gaps Initiative (DGI-2). This report also lays out priorities for a new initiative led by the IMF to address gaps relating to emerging policy needs. The report finds that significant progress has been made in addressing data gaps identified during the global financial crisis of 2007-08 through the two phases of the Data Gaps Initiative, including in the development of conceptual frameworks, and improvements in data coverage, timeliness, and periodicity. Building on the close collaboration among the participating economies and international organisations, the peer pressure mechanism, and explicit support from the G20, policy makers now have a better understanding of the risks and vulnerabilities their economies face.  Continue reading…

by Laura van Geest

The last decade has brought progress in terms of financial stability, financial wellbeing, and fair and transparent markets. However, these are not ‘safe assets’. Climate change, the destabilisation of the international political order and the normalisation of monetary policy all affect the economy, the financial sector, consumers, and society at large. Digital transformation in particular will shape the future of the financial sector and financial supervision. Will the traditional financial services companies still play an important role twenty years from now ? Or will the technological superiority of Big Tech firms make them the dominant players ? Or will we move towards an alternative world of decentralised finance ? And what are the implications for supervisors and policymakers ?
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