The adoption of appropriate global standards for financial stability and integrity is of great importance to ensure that financial inclusion is pursued in tandem with safe and sound financial systems.
Standard-setting bodies recognize that the implementation of global standards should be proportionate, risk-based and without unintended consequences for the promotion of financial inclusion. Nonetheless, achieving proportionality at the national level can be challenging for a variety of reasons. These include:
• capacity challenges in effective implementation of a risk based approach;
• inter-agency coordination and data challenges; and
• insufficient tools to monitor the impact of standards on sectors which may have important roles in financial inclusion.
The Financial Stability Board (FSB) acts as a coordinating body of SSBs with respect to financial stability. In addition, six SSBs engage in work relevant to financial inclusion: The Basel Committee for Banking Supervision (BCBS), the Committee on Payments and Market Infrastructures (CPMI), the Financial Action Task Force (FATF), the International Association of Deposit Insurers (IADI), the International Association of Insurance Supervisors (IAIS), and the International Organization of Securities Commissions (IOSCO).
In 2010, the G20 Principles for Innovative Financial Inclusion were developed with the aim of creating an enabling policy and regulatory environment for innovative financial inclusion. The eighth principle, which relates to ‘Proportionality’, calls for the building of a policy and regulatory framework that is proportionate to the risks and benefits involved in such innovative products and services, and is based on an understanding of the gaps and barriers in existing regulation.
In July 2014, the members of the Alliance for Financial Inclusion (AFI) created the Global Standards Proportionality (GSP) Working Group. This serves as a platform to facilitate peer learning among policymakers and regulators in achieving a balance between financial inclusion, integrity and stability, as well as to examine the proportionate implementation of standards set by global Standard-Setting Bodies (SSBs).
In May 2015, the Global Symposium “Towards Proportionality in Practice: Financial Inclusion and Implementation of Global Standards” was held in Kuala Lumpur, co-hosted by Bank Negara Malaysia, the Toronto Centre, and AFI. The adopted KL Resolution of Proportionality in Practice, calls for the gathering of data and evidence on the impact on implementing global financial stability standards in developing countries, highlighting the costs of unintended consequences and the benefits of proportionate approaches. It also calls for the documentation of successful regulatory and supervisory approaches to implementing proportionality, and the continuation of peer learning for successful approaches to implementing proportionality globally.
Within the global standards proportionality (GSP) thematic area, AFI members have pioneered and implemented a number of approaches to achieve effective policy approaches which balance financial inclusion, stability and integrity considerations. They are also advancing peer learning and capacity building with respect to the opportunities and risks presented by innovative technologies, mitigating the impact of global bank ‘de-risking’ on affected jurisdictions and ensuring that global standards are implemented with consideration for the financial inclusion of disadvantaged groups, including women, youth, forcibly displaced persons and populations living in rural areas.
Where not implemented with proportionality considerations sufficiently at the forefront, the implementation of global standards for financial integrity and stability can have adverse consequences for the financial inclusion of women and other disadvantaged groups. Examples include where account opening requirements stipulate types of documentation that are less widely held by women, particularly in low-income communities and rural areas, or where women entrepreneurs are unable to access credit from financial institutions due to lack of collateral or perceptions of risk. Attentiveness to gender inclusion in the implementation of global standards is vital and can help to mitigate such unintended consequences.
GSP, as a thematic area, covers a total of 18 Maya Declaration targets, including those related to the proportionate implementation of both financial integrity and financial stability standards.
|Primary thematic area||2012||2013||2014||2015||2016||2017||2018||2019||2020|
Global standards proportionality
|Maya Declaration targets||3||3||5||5||6||8||10||18||18|
AFI’s Global Standards Proportionality Working Group (GSPWG)
GSPWG is a platform that provides technical support to developing and emerging country policymakers to implement global standards for financial stability (e.g. the Basel Framework) and financial integrity (e.g. Financial Action Task Force [FATF] 40 Recommendations) proportionately and without unintended negative consequences for financial inclusion.
The working group supports AFI’s Global Standards and Policy Committee with respect to strategic engagements with global standard-setting bodies and leverages on AFI’s partnership with the FATF-Style Regional Bodies and the International Association of Deposit Insurers.
Members also exchange information on the opportunities and risks associated with new technologies, such as digital identity innovations, regulatory technology solutions, and the growing use of virtual assets, which could potentially impact the effectiveness of global standards and regulatory compliance.
The working group has four thematic subgroups and one taskforce:
•Digital Identity and E-KYC
•Virtual Assets Regulation
•Stress Testing & Crisis Resolution for E-Money Providers
•Climate Change, Sustainable Finance, and Financial Stability
•RegTech Taskforce (Jointly with DFSWG and FIDWG)
Clarence Blay , Bank of Ghana
Florabelle Santos , Bangko Sentral ng Pilipinas
Gender Focal Point
Ramizul Islam, Bangladesh Bank
Digital Identity and E-KYC Subgroup
Key objectives: Develop practical guidance (Policy Model) to support members’ implementation, based on impactful examples across the AFI network and beyond.
Virtual Assets Regulation Subgroup
Key objectives: i) Channel AFI member voices and experiences into the new FATF consultation process on virtual assets; ii) Develop guidance and capacity building tools for AFI members to support fulfilment of FATF requirements which avoiding unintended consequences.
Stress Testing & Crisis Resolution for E-Money Providers Subgroup
Key objectives: Develop a guideline note and regulatory toolkit which will map current regulatory gaps in stress testing & crisis resolution in respect of non bank e money providers; and develop initial guidance and a policy toolkit for regulators on these topics.
Climate Change, Sustainable Finance, and Financial Stability Subgroup (Jointly with IGFWG)
Key objectives: i) Channel AFI member voices and experiences into the FSB stocktaking and activities around climate change and financial stability; ii) Develop guidance on actions AFI members can take to strengthen financial institutions’ responses to climate risks, including socioeconomic impacts
RegTech Taskforce (Jointly with DFSWG and FIDWG)
Key objectives: To address the challenges of the new digital-age financial solutions, regulators from across the world are turning to regulatory and supervisory technologies (RegTech and SupTech). This task teams aims to provide peer learning within members and initial guidance on adapt RegTech and SupTech solutions specific to the needs and context of their jurisdictions.
1st: Bali, Indonesia
|2nd: Lima, Peru|
3rd: Riviera Maya, Mexico
|54th: Lilongwe, Malawi|
5th: Cape Town, South Africa
|6th: Kuala Lumpur, Malaysia||7th: Frankfurt, Germany GSPWG|
1st: Port of Spain, Trinidad % Tobago
|2nd: Kuala Lumpur, Malaysia|
3rd: Maputo, Mozambique
|4th: Moscow, Russia|
5th: Nadi, Fiji
|6th: Accra, Ghana|
7th: Sharm El Sheikh, Egypt
|8th: Siem Reap, Cambodia|
9th: Sochi, Russia
|10th: Cairo, Egypt|
11th: Kigali, Rwanda
|12th: Virtual Meeting|| 13th: Virtual Meeting |
14th: Virtual Meeting
AFI’s Global Standards Proportionality Working Group (GSPWG) webinar on Virtual Assets Regulation: Aligning Inclusion and Integrity Goals explored the Financial Action Task Force (FATF) standards and guidance on AML-CFT risks in the virtual assets sector, steps to take within the sector to mitigate risks and enhance compliance. The webinar covered also regulatory approaches by AFI members to meet FATF expectations and safeguard financial integrity without undue hindrance to innovation or inclusion.- Read More
Policymakers in AFI network and globally have identified the economic and financial losses brought about by climate change as a significant threat to financial stability as its socioeconomic impacts have the potential to reverse years of gains in financial inclusion in developing countries.
AFI’s Global Standards Proportionality Working Group (GSPWG) and Inclusive Green Finance Working Group (IGFWG) Webinar explored topics on the linkages between financial stability, climate change, and inclusive green finance policies, as well the opportunities that exist for member institutions to contribute to relevant standard-setting and international processes.