On 16 November 2022, the Financial Stability Board (FSB) published its latest annual report on promoting financial stability.
The report, delivered to the G20 leaders ahead of their Bali Summit, describes the FSB’s work to promote global financial stability.
Among other things the report makes the following findings:
- The outlook for financial stability is particularly challenging amidst high inflationary pressures, elevated debt levels, lower growth, and much tighter global financial conditions. So far, global financial markets have proved to be resilient. However, many authorities have limited policy space to intervene should a shock materialise.
- Market turbulence could be amplified by still elevated valuations of some assets, forced sales from sudden unwinding of leveraged positions of non-bank financial institutions, and liquidity mismatches in some types of funds.
- Accelerated digitalisation has improved efficiencies but also raised operational resilience issues, including cyber risks; dependence on BigTech and FinTech providers in some markets; and threats to the business models of traditional financial institutions.
- The recent turmoil in crypto-asset markets has highlighted a number of vulnerabilities in the sector that are similar to those in traditional financial markets. Growing linkages between crypto-asset markets and the traditional financial system increase the risk of spillovers, though the few linkages to date have limited the degree of contagion.
- The FSB has intensified monitoring of vulnerabilities and has continued support of international cooperation and coordination in the aftermath of COVID-19 and Russia’s invasion of Ukraine.
- Exposure to climate risks is becoming more evident and recent climate events have shown the potential for non-linear effects.
- Progress in implementing G20 reforms continues but remains uneven. For example, jurisdictions’ adoption of Basel III continues, though there is uneven progress in implementing the final reforms to the capital framework.
- In the face of the current challenges for financial stability, timely and consistent implementation of G20 reforms remain as relevant as they were initially agreed.