This panel took place at the 2024 International Monetary Fund and World Bank Group Annual Meetings.In today's fast-changing financial landscape, artificial intelligence (AI) is at the forefront of transformation, reshaping how markets operate and how they are regulated. As we embrace AI's immense potential, it is crucial to address ethical considerations, data privacy, and the need for transparency. Collaboration among industry stakeholders, regulators, and technology developers is essential...

This was the fifth webinar of the series on the revised Core Principles for effective banking supervision. The panel discussed the inclusion of climate risk in the updated Core Principles and highlight why both banks and supervisors should adopt flexible practices to address the evolving nature of climate risks.Panelists:Elsie Addo Awadzi, Deputy Governor, Bank of Ghana; Board Member, Toronto CentreShahin Mahmudzade, Executive Director, Central Bank of the Republic of AzerbaijanModerator:Jean...

This was the fourth webinar of the series on the revised Core Principles for effective banking supervision.The revised Core Principle 25 emphasizes banks’ capacity to handle severe operational risks, including pandemics, cyber threats, and natural disasters. Additionally, the revisions introduce a proportionality approach, aligning regulatory rules and supervisory practices with each bank's systemic importance and risk profile. This ensures that standards are scaled appropriately, from large...

This was the third webinar of the series on the revised Core Principles for effective banking supervision.The Basel Committee wants banks to institute a sound risk culture, to maintain strong risk management practices, and to adopt and implement sustainable business models. The revised Core Principles make clear that the assessment of business model sustainability is a key component of effective supervision.The panel discussed how supervisors can assess business models and determine if and...

This was the second webinar of the series on the revised Core Principles for effective banking supervision.Advances in digitalization and financial technology continue to affect the landscape of the financial system, including the provision of banking services.The Core Principles for effective banking supervision (BCP) have been amended to reflect the impact of new risks, including risks relating to the ongoing digitalization of finance. The panel discussed regulatory and supervisory...

This was the first webinar of the series on the revised Core Principles for effective banking supervision.The post-Global Financial Crisis (GFC) period has seen banks continue to build their resilience to financial risks, underpinned by stronger regulatory and supervisory frameworks, including the Basel III standards. The Core Principles for effective banking supervision have been strengthened to reflect key elements of many of the post-GFC reforms introduced by the Basel Committee on Banking...

The worldwide total of forcibly displaced persons (FDPs) reached 110 million in 2022, with the cross-border refugee population standing at 36.4 million in 2023. The continuing cross-border refugee crisis caused by global conflict has created great vulnerabilities for FDPs. This TC Note and accompanying podcast discuss the expansion of access to finance for FDPs and the unique challenges it presents for financial regulators and supervisors, such as the need to comply with customer due...

Cross-border supervision is one of the more challenging supervisory priorities. It adds layers of complexity, new stakeholders, and potential challenges to effective supervision. This TC Note and accompanying podcast discus the implications for home and host financial supervisors of cross-border supervision of the adequacy of capital and liquidity. They also consider the challenges of cross-border supervision and conglomerate supervision.Speaker: Brad Shinn, Program Leader, Toronto...

Financial crime is a significant threat to the safety and security of citizens and to the integrity of individual countries and the global financial system. While the proliferation of digital technologies presents many opportunities for financial systems, it also has introduced a new age of financial crime. For instance, crypto assets are a currency of choice among criminals.The panel discussed:* The importance of global implementation of FATF’s standards to ensure responsible financial...

The nature of retail conduct supervision, which can often be more prescriptive and rules based, can result in different approaches to intervention.This TC Note and accompanying podcast discusses how supervisors should take a more proactive risk-based approach to dealing with potential areas of misconduct and apply the key principles of risk-based supervision to facilitate an earlier identification and remediation of issues.Speaker: Karen Badgerow, Program Leader, Toronto CentreHost: Chuin...

Stress testing should be a critical element of risk management for most financial institutions. It should alert boards and senior management to potential adverse outcomes related to a broad range of risks and vulnerabilities, identify potential losses, liquidity needs, and operational responses should adverse shocks occur. Supervisors should, in turn, have a strong interest in stress testing by financial institutions. This TC Note and accompanying podcast discusses the need for financial...

Supervisory stress testing is a technique used to assess the robustness of financial institutions and the broader financial system to severe but plausible shocks. Since the Global Financial Crisis of 2008, it has emerged as an important tool for supervisors that complements other approaches and methods.Stress testing is one of the more complex tasks undertaken by supervisory authorities. Primarily used to inform solvency and liquidity adequacy assessments, it is also a critical method for...

Liquidity is fundamental to the operation of financial institutions. Problems can quickly arise and escalate, threatening the stability of the financial system.This TC Note and accompanying podcast focuses on good practices in liquidity management by financial institutions in the banking, insurance, pensions, and securities sectors. It provides guidance on how supervisors should assess liquidity management, including the use of scenario analysis and stress testing. Lessons learned from recent...

The world's most economically vulnerable populations are frequently impacted by natural catastrophes (NatCats).The International Association of Insurance Supervisors' (IAIS) recent report, A call to action: the role of insurance supervisors in addressing natural catastrophe protection gaps (https://www.iaisweb.org/uploads/2023/11/IAIS-Report-A-call-to-action-the-role-of-insurance-supervisors-in-addressing-natural-catastrophe-protection-gaps.pdf), outlines actions insurance supervisors can...

Experts from the development and financial supervision sectors discussed some of the challenges and solutions for farmers from emerging markets and developing economies in accessing finance to adapt to climate change.Key takeaways from this insightful conversation include the need to:* Build a common vision and establish a dialogue between supervisors and the market* Increase access to finance for small holder farmers through safe digital solutions* Implement gender-inclusive policies to...

The International Sustainability Standards Board (ISSB) has developed new standards for sustainability reporting and climate-related disclosure.This new TC Note and accompanying podcast discuss the benefits, challenges, and actions needed for the standards to reach the goals they were set out to meet. They outline how the standards can help achieve the following key supervisory goals:* Investor and consumer protection* Safety and soundness of financial institutions* Financial system stability...

In 2023, the Consultative Group to Assist the Poor (CGAP) released a technical guide on Digital Financial Services for Financial Inclusion: Tools for Supervisors (https://www.cgap.org/research/publication/digital-financial-services-for-financial-inclusion-tools-for-supervisors).This podcast highlights key takeaways from the guide, including:* How to improve supervisory data* An approach to designing supervisory framework* How artificial intelligence can improve or impair...

To achieve net-zero, every economic sector will need to decarbonize, and financial institutions need to fund activities supporting this transition. Financial institutions and their customers will need to develop credible transition plans.The panel discussed:* the common elements for transition plans;* the need for financial regulators to set supervisory expectations for transition plans; and,* how transition plans should be considered within the prudential framework.Panelists:Martin Moloney,...

Emerging Markets and Developing Economies (EMDEs) are facing numerous hurdles in mobilizing the necessary transition financing for decarbonization, including fiscal constraints, restricted access to private capital, and a shortage of expertise in project development and financing. Ramping up blended finance efforts is critical for this transition.The panel discussed:* some practical examples of successful blended finance transactions; and,* the role that financial regulators and supervisors...

This TC Note and podcast address issues encountered by introducing risk-based supervision. These range from technical matters to more complex challenges, such as:* appropriate calibration of ratings;* risk-management controls;* managing on- and off-site work;* significant enterprise-wide activities;* treating ‘unsupervisable’ structures;* independent local boards; and* upstreaming of profits to parent institutions.Speaker: Paul Wright, Program Leader, Toronto CentreHost: Chuin Hwei Ng, Senior...

This TC Note and podcast brings together principles and practices related to financial sector oversight that are relevant to financial inclusion, including proportionate regulation, risk-based supervision, and consumer empowerment. They emphasize the need to understand and manage linkages and trade-offs between different policy areas, and cover some cross-cutting issues that supervisors are facing, such as new innovations and sources of competition, gender disparities in financial inclusion,...

The Intact Centre for Climate Adaptation at the University of Waterloo recently released a report on Integrating Physical Climate Change and Extreme Weather Risk into Institutional Investing (https://www.intactcentreclimateadaptation.ca/wp-content/uploads/2023/07/UoW_ICCA_2023_07_Integrating_Physical_Climate_Change_Risk_Into_Investing.pdf). The report examines the strategic and financial impact physical climate risks have on businesses.In this podcast, the speakers address some topics...

Crypto regulation was a key agenda of the G20 summit. While regulations and a framework have yet to be finalized, consensus emerged that a blanket ban was not feasible. The joint declaration noted that the G20 will continue to “closely monitor the risks of the fast-paced developments in the cryptoasset ecosystem,” and the leaders endorsed the Financial Stability Board’s (FSB’s) “high-level recommendations for the regulation, supervision, and oversight of crypto-assets activities and markets...

Central banks and supervisors need to consider climate change and biodiversity loss, which are interconnected and mutually reinforcing. Looking ahead, dealing with nature-related risks may also involve transition plans. Transition plans are crucial to credible implementation. The panel discussed:* how central banks and supervisors should adjust to better capture climate-related impacts;* the effects of tighter monetary policy on climate investments in industrialized economies and their...