Leaders from the G20 nations, including Prime Minister Stephen Harper, are expected to name the new FSB chairman at their Nov. 3-4 summit in Cannes. There are signs that the institution may be given more clout – and possibly its own budget – so it can properly monitor whether and how the tougher rules are actually being implemented by national governments.
What is less clear is whether Mr. Carney would be able to use his three-year term to turn the institution’s growing influence into something that transcends temporary waves of crisis response and prevention.
This is a critical moment for the FSB, says former prime minister Paul Martin, who was one of the authors of the current G20. The challenge for the organization lies in proving that it can “establish its authority and establish rules in an industry that is globally seamless,” he said.
If the FSB is granted the authority it needs, the chairmanship that Mr. Carney is likely to get could eventually be seen as a highly prestigious job – as important as leading the IMF, Mr. Martin said. “Both institutions are going to have to prove themselves over the next four or five years,” he said. “There is no doubt that Canada will benefit from a strong FSB and that Mark Carney has the required skills.”
With files from reporters Grant Robertson and Tara Perkins in Toronto
THE FINANCIAL STABILITY BOARD
Where it came from
The Financial Stability Board was created at a Group of 20 summit in London in April, 2009, during the global financial crisis. It replaced an earlier group called the Financial Stability Forum. The FSB has more members, broader responsibilities and – rhetorically, anyway – more clout. The move reflected the obvious need for stronger regulation and monitoring after the U.S. subprime mortgage collapse, as well as the need for advanced economies to share leadership with emerging economic giants like China, India and Brazil.
What it is
Unlike its predecessor, the FSF – established in 1999 by G7 finance ministers and central bankers – the FSB brings together policy makers from more than 20 countries and the world’s key financial standard-setting bodies. It is based in Basel, Switzerland, and housed within an organization called the Bank for International Settlements. With no budget or full-time staff of its own, the FSB so far has relied on the BIS and member governments to lend officials to help it complete work on whatever recommendations the board agrees to push.
Why it's important
The G20 asked the FSB to craft new rules to govern global finance and ways to boost supervision of markets, banks and other financial institutions, and also to monitor whether and how member countries implement its proposals. The aim is to prevent another meltdown like the one in 2008. Backers of the FSB hope that one day it will be on par with other key pillars of global economic governance, like the International Monetary Fund, World Bank and World Trade Organization. Currently, while in the middle of the G20’s efforts to forge co-operation on financial regulation, the FSB has little true authority to enforce its will. Gains instead come through persuasion or “peer pressure.”
Who has chaired it
The top job at the board is a part-time position and the person is drawn from the officials and agency heads from the countries that make up the FSB. Mario Draghi, the Italian central bank governor who leaves next month to take one of the most thankless jobs in the global economy these days – president of the European Central Bank – is its first chairman and was head of the FSF before that, starting in 2006. Before that, Roger Ferguson, a former vice-chairman of the U.S. Federal Reserve Board, led the FSF from 2003 until 2006. Jeremy Torobin