Global Trustee and Fiduciary Services Bite-Sized Issue 11 2024

4 QUICK LINKS CULTURE CRYPTOASSETS ELTIFS EMIR FINANCIAL STABILITY BOARD FINTECH MIFID II/MIFIR OPERATIONAL RESILIENCE SUSTAINABILITY T+1 ASIA/PACIFIC EUROPE LUXEMBOURG NORTH AMERICA UNITED KINGDOM Global Trustee and Fiduciary Services Bite-Sized | Issue 11 | 2024 The FSB says that there is some evidence that social media had an influence on some of the recent bank runs, though the depositor categories at the centre of those runs are likely to have had access to other information sources. Technological advancements have facilitated an easier and faster transfer of deposits in recent years, which may have made depositors more willing to move funds between banks. The FSB states that the findings in the report raise issues that are relevant for bank managers, supervisors, regulators, resolution authorities and policy makers. The speed of the recent runs means that banks and authorities may need to be able to react much more quickly to deposit outflows than in the past; find ways to address the liquidity and solvency vulnerabilities that gave rise to such extreme outflows; and consider whether monitoring of social media could be helpful as an early warning tool to flag potential stress at a bank or wider turmoil that might affect banks. The FSB says that the possibility of further rapid deposit runs in the future also raises challenges for authorities’ ability to execute a resolution. Authorities and banks should enhance their operational readiness for resolution and incorporate effective communication strategies to ensure coordinated and consistent messaging. Link to Report here FSB Chair Sets Out the FSB’s Work to Maintain Financial Stability Amidst Technological Advancements On 22 October 2024, the FSB published a letter from its Chair, Klaas Knot, to G20 Finance Ministers and Central Bank Governors ahead of their meeting on 23-24 October 2024. The letter focuses the FSB’s work to harness the benefits and respond to the challenges of technological innovation. The letter covers: • Depositor behaviour and interest rate and liquidity risks in the financial system : The March 2023 banking turmoil illustrated the role that technological advancements can play in accelerating the propagation of shocks. The letter covers the FSB’s analysis on the role of technology, social media, and interest rates on depositor behaviour and deposit ‘stickiness’. The report will be submitted to the G20 ahead of this meeting. • Cyber and operational resilience : Cyber and operational risks to financial stability were illustrated by the CrowdStrike outage and by operational disruptions in high-value messaging and payments systems in July. To facilitate efficient and effective response and recovery from operational this, the FSB is delivering, for public consultation, a common Format for Incident Reporting Exchange. • Crypto-assets : The FSB’s status report outlines the progress made by jurisdictions in implementing the global regulatory framework for crypto-asset policy and regulatory responses developed by the IMF, FSB and standard-setting bodies. • Tokenisation : The FSB’s report on the financial stability implications of tokenisation outlines steps that authorities and international bodies should consider to address data gaps inmonitoring tokenisation adoption; increase understanding of how its features fit into legal and regulatory frameworks and supervisory approaches; and facilitate cross-border information sharing. Link to Letter here FINTECH ASICWarns Governance Gap Could Emerge in First Report on AI Adoption by Licensees On 29 October 2024, the Australian Securities and Investments Commission (ASIC) published Report 798 ‘Beware the gap: Governance arrangements in the face of AI innovation.’ In a press release, published on the same day, ASIC stated it is urging financial services and credit licensees to ensure their governance practices keep pace with their accelerating adoption of artificial intelligence (AI). ASIC says that the call comes as its first state of the market review of the use and adoption of AI by 23 licensees found there was potential for governance to lag AI adoption, despite current AI use being relatively cautious.