klaas knot : the recent financial tumult - lessons and responses keynote speech ( virtual ) by mr klaas knot, president of the netherlands bank, at the 7th annual conference of the european systemic risk board " financial stability challenges ahead : emerging risks and regulation ", 16 november 2023. * * * good afternoon everyone. as many of you know, i am a general board member of the european systemic risk board ( esrb ). in that capacity, i contribute to, and follow the work of the esrb closely. but today, i will be speaking as chair of the financial stability board. and so, i wanted to begin by highlighting a few similarities between these two important international bodies. both the esrb and the fsb were created after the 2008 global financial crisis ( gfc ). the former under the eu, the latter under the g20. those of you who have been involved in one of our committees such as the esrb's atc 1 or the fsb's src 2 will know that we share a love for acronyms. but, of course, we have something far more fundamental in common. we both monitor vulnerabilities in the financial system. we make policy recommendations to address them and we look at how these recommendations are implemented. ultimately, we have the same goal. increasing the resilience of the financial system. either with a european focus, in the case of the esrb ; or with a global focus – in the case of the fsb. international cooperation is in our dna. so what has the fsb been doing? since our inception in 2009, we have overseen a range of financial sector reforms. these include : increases in the quality and quantity of capital and liquidity in the banking system ; frameworks to resolve failing financial institutions ; and enhancements to the resilience of non - bank financial intermediation, among others. i think it's fair to say that these post - crisis reforms have made the financial system better equipped to withstand unexpected shocks. of course, our focus is on the financial system at large. therefore, individual financial institutions may fail even as the broader system continues to function. we saw this happening in the banking sector earlier this year. but, however unexpected shocks like these may have been, in hindsight, they can be explained. and so, it is up to us, regulators, but also the industry, to look for that explanation and draw lessons from it

insufficient liquidity risk management on the part of the affected non - banks. on various occasions in recent years, large market movements or redemption pressures have placed non - banks under strain. 3 / 4 bis - central bankers'speeches these disruptions aren't just an existential threat to the players involved. they spill over onto other institutions – and in some cases, they affect the functioning of the underlying markets. so, following the march 2020 market turmoil, the fsb embarked upon a wide - ranging effort to bolster nbfi resilience. in our work so far, we have focused on both entity types and activities which may contribute to systemic risk. we have made good progress, including by issuing policy recommendations for money market funds in 2021. looking ahead, we will soon issue policy recommendations to address liquidity mismatches in open ended funds. and next year we will advance our work to address excessive leverage in nbfi, and to enhance liquidity preparedness for margin calls. let me conclude. the failures of various banks this year were an important reminder of the speed with which vulnerabilities can be triggered in the current environment. we are learning lessons from this. at the same time, contagion from these individual bank failures was limited. this is thanks to the swift and concerted actions of authorities on both sides of the atlantic, and amid confidence in the resilience of the broader financial system. that confidence is underpinned by the financial reforms that regulators collectively introduced following the gfc. i don't know what the future will bring. there will certainly be more challenges to come. but as long as we continue to learn from the past. as long as we advance the implementation of the reforms already agreed upon. and as long as we work together across jurisdictions to address emerging vulnerabilities - we can maintain a level playing field, set on a solid foundation. and, we can safeguard a future in which the financial system remains a source of growth and prosperity for our economies. thank you. 1 atc stands for advisory technical committee 2 src stands for standing committee on supervisory and regulatory cooperation 3 quoted in : doornbusch, r. goldfajn, i and valdes, r. ( 1995 ). currency crises and collapses. brookings papers on economic activity, 2, pp 219 - 293. 4 report on the 2023 banking turmoil ( bis. org ) ( refers to an external site ) 5 2023 bank failures