What is the Financial Stability Board?

The Financial Stability Board (FSB), is a cooperative institution created to advise world leaders on fiscal policy. A successor to an earlier organization, the Financial Stability Forum (FSF), the FSB was created in 2009 after a call by G20 leaders to broaden the scope of the forum for greater efficiency. Though there are many important services the FSB is intended to provide, its greatest mandate is assist financial stability throughout member nations and the larger world.

The original Financial Stability Forum created a discussion and advisory group that focused on national and global financial issues. The FSF brought together the heads of national and central banks, international market analysts, and other financial professionals and advisors with a significant viewpoint on international financial stability. Through committees and reports, the FSF attempted to improve communication, cooperation, and standards in the financial world. The 2009 shift to the Financial Stability Board attempted to broaden the scope of attention, bringing together financial ministries and professionals representing more than 20 countries, along with several international and multinational financial institutions.

One of the primary goals of the Financial Stability Board is to create voluntary safety and practice standards for financial institutions worldwide. These standards are developed as the result of research, studies, and analysis performed by the members of the FSB. By creating these standards, the general hope is that nations will be less vulnerable to some types of economic crashes, such as those created by economic bubbles.

Another critical goal of the FSB is to analyze and report on financial risks, or risks in other segments of activity that could significantly harm the global economy. In addition to assessing risks, committees and boards work to present possible plans of action to leaders in order to prevent risks from actualizing, or at least minimize the damage. In this mandate, the Financial Stability Board works cooperatively with international organizations, such as the International Monetary Fund (IMF) and the World Bank, to create indicators and early warning systems for various possible crises.

A stable financial system is crucial to the health of both national and global economy. The Financial Stability Board, while having no direct power, has a tremendous opportunity to influence or at least educate world leaders about safe and efficient regulatory policy that may prevent financial devastation. With a far broader scope than its predecessor, the FSF, the Financial Stability Board may be able to coordinate efforts on a wider and more effective basis than ever before.