What the FSB Chair told the G20: AI, stablecoins and the push for consistent implementation

 

In a letter dated 8 October, ahead of the G20 finance ministers’ and central bank governors’ meeting in Bangkok on 15 October, Andrew Bailey, Chair of the Financial Stability Board (FSB) and Governor of the Bank of England, set out the FSB’s work for the US G20 Presidency. This blog examines the letter and the accompanying reports, and draws out the implications for firms.

 

The risks he keeps coming back to

Bailey reiterates concerns raised in August. Sovereign bond markets remain volatile, and changes in the investor base could increase the risk of abrupt moves and disorderly deleveraging. Private credit has its own vulnerabilities, including tighter financing, liquidity mismatches, uncertain valuations and limited transparency. AI brings two distinct risks: a reassessment of AI related valuations could trigger a wider market correction, while AI enabled cyber threats could undermine the resilience of critical financial institutions and financial market infrastructures.

 

AI: guidance firms can use

The FSB has finalised its Sound Practices for the Responsible Adoption of AI (the FSB’s first response on the topic), incorporating feedback from the public consultation, for delivery to the G20. Bailey describes the practices as a toolkit that firms can adapt to their size, type and level of AI use. They cover organisation wide governance, the AI lifecycle, cyber risk and third-party services.

Bailey says industry engaged constructively and helped the FSB complete the work quickly, and calls on the G20 to champion the practices. This is not the end of the work: broader macroprudential issues may warrant continued consideration, and safe AI adoption will continue to feature on the FSB’s agenda next year.

 

Stablecoins: global products, national rules

Bailey’s concern here is a mismatch. Global stablecoin arrangements cross borders by nature, but national rules are developing at different speeds and cooperation between authorities is still young. He also notes that stablecoins keep appearing in discussions of fraud and financial crime, particularly where they operate from lightly regulated jurisdictions.

The FSB’s accompanying note finds that how national regimes interact is uncertain or undefined in many places, including how foreign issued stablecoins are treated. One arrangement can span several entities and regimes, while the tools for cross-border oversight, crisis management and cooperation in a failure are immature or missing. The FSB plans to monitor cross-border vulnerabilities more closely, support implementation of its 2023 recommendations, improve information sharing, and gather information on how authorities plan for a stablecoin arrangement in distress.

Closer to home, the UK is also moving towards a new regulatory regime for cryptoassets. The Financial Conduct Authority’s application period opened on 30 September 2026 and closes on 28 February 2027. The new regime is due to take effect on 25 October 2027, and firms carrying out the relevant regulated activities will need to obtain FCA authorisation or the appropriate variation of permission.

 

Keeping the rulebook fit for purpose

The FSB is also delivering to the G20 a consultation report setting out principles for regulatory and supervisory modernisation. Bailey’s tone is measured: existing frameworks have helped address vulnerabilities exposed by past crises and have held up through recent uncertainty. However, they need to keep adapting to new technologies, market changes and emerging risks.

The proposed principles aim to make frameworks effective, efficient, risk focused and forward looking, supporting growth without weakening resilience. The final report is expected in 2027, leaving scope for stakeholders to contribute through the consultation process.

 

The unfinished business

Two of the deliverables focus on implementation, an issue that may prove especially important for firms.

The first is the G20 Implementation Monitoring Review, led by Randal Quarles, a former FSB Chair, and building on the October 2025 interim review. It examines whether the FSB’s policy design process helps or hinders effective implementation of agreed reforms. Bailey points to the need for greater consistency across FSB outputs, wider consultation and better prioritisation.

The second is a peer review of public sector backstop funding mechanisms: the last resort funding that authorities may need to support banks in resolution. The review identifies gaps that could weaken authorities’ preparedness to resolve systemic banks in an orderly way, drawing on lessons from the March 2023 bank failures. The FSB says it will work with jurisdictions to address these gaps and has asked G20 members to help.

 

Key takeaways

AI risk sits within existing risk management disciplines. The FSB’s sound practices place AI governance, cyber risk and third-party management within established risk management disciplines. Firms should consider how these practices apply to their own AI use; the letter does not say so, but supervisors may well use them as a reference point.

Stablecoin uncertainty is likely to persist. The FSB identifies unresolved questions about cross border treatment, including how foreign issued stablecoins are treated and how authorities would cooperate if an arrangement failed.

Implementation is moving up the agenda. Both the review of the FSB’s policy design process and the findings on backstop funding highlight the gap between agreeing standards and putting them into practice.

Modernisation does not mean deregulation. The proposed principles emphasise efficiency and growth alongside resilience. The consultation report is being delivered to the G20 and the final report is expected in 2027; firms should watch the FSB’s website for the timing of the consultation and any opportunity to provide input.

These concerns are shared across authorities. The FSB’s focus on sovereign bond markets, private credit and AI related valuations echoes themes in the Bank of England’s July assessment.

 

The bottom line

Bailey’s central message is that the financial system is changing rapidly, and that new technology and shifting market structures bring opportunities as well as risks. For firms, the practical question is whether governance, third-party oversight, cyber resilience and exposure monitoring are keeping pace. The FSB’s reports point to implementation, not simply the publication of standards, as the next challenge.