**Focus on International Financial System**

The Financial Stability Forum held its twelfth meeting in Washington, DC on Wednesday and Thursday of this week, focusing as usual on risks and vulnerabilities in the international financial system. These issues included offshore financial centres and global progress and challenges associated with the implementation of standards in financial sector regulation. Credit risk transfer (CRT), reinsurance, hedge funds, financial reporting and governance, strengthening capital markets against financial fraud — all issues addressed in previous meetings — were on the agenda.

On the occasion of this meeting, chaired by Roger W. Ferguson, Jr., Vice Chairman of the Board of Governors of the Federal Reserve, the Forum also met with a group of financial market participants to exchange views on developments in financial markets and institutions.

With particular regard to regulatory standards in the banking, securities and insurance sectors, FSF members discussed:

• the treatment of preconditions for sound supervision and regulation

• the consistency of implementation methodology

• cross-sector and cross-border regulation

• regulatory and corporate governance and public disclosure

The FSF concluded that these matters merit further attention by international standard setters, working with the international financial institutions.

**Offshore Financial Centres (OFCs) Initiative**

Members took note of current efforts by IOSCO, the Basel Committee on Banking Supervision, the IMF, and the Offshore Group of Banking Supervisors.

The FSF agreed that achieving further progress is necessary, indicating that it looks forward to periodic reports based on the IMF’s assessments and IOSCO’s work. The FSF reiterated its view that the publication by OFCs of their IMF assessments and follow-up reports is of paramount importance.

The FSF will consider appropriate steps, based on objective criteria and due process, to ensure further progress in this field.

The FSF published the results of its review of the OFC Initiative earlier this year, following its 11th Meeting held in Rome. At that time, it reported that virtually all of the 42 jurisdictions identified as having offshore financial activities (including The Bahamas) had undergone an initial assessment by the IMF. The IMF’s Excecutive Board had agreed the previous November to make the regular monitoring of OFCs a standard component of its work.

Convened in April 1999, the Forum brings together on a regular basis national authorities responsible for financial stability in significant international financial centres, international financial institutions, sector-specific international groupings of regulators and supervisors, and committees of central bank experts.

While the FSF seeks to give momentum to a broad-based multilateral agenda for strengthening financial systems and the stability of international financial markets, the necessary changes are enacted by the relevant national and international financial authorities. The FSF co-ordinates the efforts of these various bodies in order to promote international financial stability, improve the functioning of markets, and reduce systemic risk.

The next meeting of the Financial Stability Forum will be held in Tokyo, on 11 March 2005.