THE FINANCIAL STABILITY BOARD: WHY SHOULD CSOs CARE ?

1. THE FINANCIAL STABILITY BOARD: WHY SHOULD CSOs CARE ? Matthew Martin, Development Finance International Washington, 15 April 2011

2. STRUCTURE OF PRESENTATION • What is FSB and how does it work ? • What are its subsidiary bodies and who does what ? • Why should CSOs care ? • Suggestions on Ways Forward

3. WHAT IS THE FSB? Financial Stability Board (FSB) established post-crisis by G20 – promoted from analytical body to coordinating and decisionmaking body on all financial regulation Does not have power to enforce regulations in member jurisdictions – rather to set standards, exchange on best practices, try to standardise across jurisdictions and monitor their implementation Members = G20 + important financial countries (HK/Singapore/Switz/Neths/Spain), but 11 have 3 seats, 6x2, 3x1 - LIC G20 members not admitted Agreed at Seoul on « Regional Consultative Groups » - not clear if genuine consultation or dissemination, which countries to participate 3

4. FORMAL FSB STRUCTURE • Key Actors: • Chair of FSB Mario Draghi (Bank of Italy) • Secretariat of >20 people (Sec-Gen Sven Andriessen) in Basel • Plenary meeting of all members - decisionmaking 2x pa • Operates through committees and working groups on key issues, made up of only some members • FSB reports to G20, most work from G20 mandates to deliver for future meetings, on some issues via Finance Ministers/CB Governors, on others direct to summit • No (?) engagement with UN (even IMF and WB do) – supposed to bring developing country views ? • Does not report to or engage with Development Working Group (issues deliberately separated even though FSB decisions affect all countries) 4

5. ORGANIGRAM 5

6. HOW DOES IT OPERATE ? Key actors are Chair, Secretariat and Working Groups, as well as mandates given to FSB by G20 itself Plenary seen as largely rubber-stamp, committees and working groups do the technical work Lack of formal procedures means Chair has strong power – can generate G20 mandates, influence WG or Committee member choice and recommendations Some degree of uncertainty/overlap with IMF – eg IMF handling public debt issues (FSB private ?), publishing lots of analysis on bank regulation and taxation; and with continuing role of BIS (still regulation committee) IMF helps dev.countries implement bank regulations; IMF/WB now gathering dev country views on regulations; some FSB affiliates help LICs implement 6

7. KEY FSB SUBSIDIARIES • International Accounting Standards Board (IASB) • accounting standards • International Organisation of Securities Commissions (IOSCO) • securities market transactions - shares, bonds, derivatives • Bank for International Settlements (BIS) – Basel Committee on Banking Supervision (BCBS) • regulation of banks • Also IAIS - Insurance and IADI – Deposit Protection • Common features • often high presence of private sector; • no openness to wider civil society or media; • little or no presence of poorer countries (except BCBS) 7

8. WHY SHOULD WE CARE (1) ? On issue of principle: We have spent last 20 years fighting for accountability and transparency in IMF and WB with some success This is the third pillar of the global economic governance system (fourth if incl WTO) and in the stone age on accountability and transparency There is currently no access whatsoever for civil society and media therefore regulations are being decided by governments only, advised in many cases by private sector actors who are being regulated and their lobbyists Also virtually no access for low-income countries 8

9. WHY SHOULD WE CARE ? (2) It covers key issues: • IASB • accounting standards crucial to tax accounting/evasion, transfer pricing etc – vital links to tax haven and tax justice campaigns • Bill Black – regulation will achieve nothing unless transparent accounts – poor accounting caused Iceland, financial crisis, Enron • IOSCO • derivatives and commodity trades and shares/bonds – vital to food and fuel price speculation and price trends • efforts to put all derivatives including commodities on markets – could dramaticlly increase regulation of speculation • BCBS • correct design of regulation to avoid future financial crises ? • application of regulations in developing countries can have major effects on availability of bank lending, including on microfinance and financial inclusion efforts 9

10. CONCLUSION/NEXT STEPS • Definitely not « Mostly Harmless » (Donnelly) • Perceived as such by G8 governments because they mainly determine global regulatory standards, and also by private actors because regulations havent bitten much • But crucial to key development issues which affect the world’s poor citizens and on which CSOs focus campaigns • Need for network to • Open up the FSB – reform governance (Brookings Commission); increase LIC membership; accountability and transparency • Advocate/share info/coordinate on specific issues • Reminds me of debt relief 15 years ago – Jubilee decided early needed to engage with institutions like Paris Club and boring technicalities like cutoff dates - one of the key reasons why >$100 billion cancelled ! 10