One of the most significant international institutional innovations since the establishment of the G20 leaders’ summit 18 months ago has been the creation of the Financial Stability Board (FSB). The Financial Stability Board: An Effective Fourth Pillar of Global Economic Governance? is a special report resulting from the collaboration of CIGI, Oxford University’s Global Economic Governance Programme, Columbia University’s Initiative for Policy Dialogue and the Foundation for European Progressive Studies. It brings together leading experts and policy insiders in a pioneering effort to assess how effective the FSB will be as a so-called “fourth pillar” in the evolving architecture of global economic governance operating alongside the International Monetary Fund, the World Bank and the World Trade Organization.

While the report reflects a diversity of opinion, the authors agree that the FSB faces serious challenges if it is to be effective. Key recommendations include:

  • To encourage compliance with international financial standards, the FSB needs an independent, robust surveillance process that applies effectively to the major powers. The FSB’s new peer review process must be supported by a strong secretariat and incentives to encourage countries to engage seriously with the process.
  • The FSB should continue to be proactive in supporting the development of an international consensus and international coordination around the development of macroprudential regulation, despite the complex technical challenges involved.
  • Greater efforts must be made to strengthen the voice of new developing country members in the organization as well as to address the exclusion of many other countries from FSB membership. The report includes ideas for strengthening the governance structure of the FSB so that important warnings concerning potential systemic problems in the international financial system can be communicated in a manner that cannot be diluted by member governments.

For more on the FSB, see CIGI G20 paper #1, "The Financial Stability Board and International Standards."

  • Stephany Griffith-Jones is Financial Markets Director, Initiative for Policy Dialogue, Columbia University.