The Central Bank of Bahrain hosted the seventh meeting of the Financial Stability Board (FSB) Regional Consultative Group for the Middle East and North Africa (RCG-MENA) in Bahrain.
At their meeting, members of RCG-MENA and representatives of the Basel Committee on Banking Supervision, IMF and World Bank began by reviewing the FSB’s policy priorities and work plan. As set forth in the 17 April 2015 letter from the FSB Chairman to the G20, the priorities fall into three main areas, namely: full, consistent and prompt implementation of the agreed reforms; finalising the design of the remaining post-crisis reforms; and addressing new risks and vulnerabilities. This was followed by a discussion of vulnerabilities and regional financial stability issues. Members exchanged views on global and regional growth prospects and the impact of the recent decline in oil prices. They considered the latter issue from the perspective of both oil importing and oil exporting countries, deliberating the various macroeconomic and financial implications, and possible policy responses.
Members then discussed the impact on the region of a decline in correspondent banking services being offered by international banks, including as a result of possible fear of potential AML/CFT enforcement actions. Members welcomed the planned focus of the FSB on this issue. A loss of correspondent banking services could lead to financial exclusion, hinder the development of emerging market financial sectors, or risk driving cross-border financial transactions into the unregulated sector.
The availability of financing for small and medium-sized enterprises and the role that capital markets can play was the topic of another session. This then led to a discussion of structural issues that influence the capital structure of corporates and possible policy measures to incentivise equity-based financing.
Members discussed the proposed revisions to the Standardised Approach for credit risk in the Basel capital framework, including proposals to reduce the reliance on external credit ratings.
The RCG-MENA is co-chaired by Erdem Başçı, Governor, Central Bank of the Republic of Turkey and Riad Salame, Governor, Central Bank of Lebanon. As the terms of the co-chairs expire on 30 June 2015, the FSB member co-chair of the RCG-MENA will rotate to Fahad Almubarak, Governor, Saudi Arabian Monetary Agency. At the meeting, the non-FSB members in the RCG-MENA appointed Mubarak Rashid Khamis Al Mansouri, Governor, Central Bank of the United Arab Emirates as the non-FSB member co-chair. The terms of the new co-chairs are for two years, commencing on 1 July 2015.
The current membership of the RCG-MENA includes financial and regulatory authorities from Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Morocco, Oman, Qatar, Saudi Arabia, Tunisia, Turkey and the United Arab Emirates.
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