WASHINGTON, April 9 (Reuters) - The global financial system has so far absorbed the economic shock caused by the Iran war, partly thanks to post-2008 crisis reforms, but rising funding costs may
Financial Stability Board Alerts G20 to Risks From Tightening Funding Conditions
FSB Chair Warns of Potential Financial System Vulnerabilities
WASHINGTON, April 9 (Reuters) - The global financial system has so far absorbed the economic shock caused by the Iran war, partly thanks to post-2008 crisis reforms, but rising funding costs may exacerbate growing stress in other parts of the system, the chair of the Financial Stability Board warned the G20 on Monday.
Warnings From Andrew Bailey to G20 Leaders
Andrew Bailey, the governor of the Bank of England and chair of the FSB, an international financial watchdog, warned of a potential “double or triple whammy” if tighter funding conditions cause multiple vulnerabilities to crystalize at the same time - including stretched asset valuations, non-bank leverage, and private credit stress.
Key Points From Bailey’s Letter
More details from the letter:
Context of the Warning
*Bailey was writing to G20 Finance Ministers and Central Bank Governors ahead of the International Monetary Fund meeting of global policy leaders in Washington this week.
Potential Triggers for Financial Turmoil
*Bailey warned that a trigger for financial turmoil could be financial markets moving to price a much larger impact on global economic growth.
Risks of Abrupt Market Re-Pricing
*In that scenario, abrupt re-pricing in equity prices could coincide with the already greater focus on valuations in private assets, he wrote.
Bank Resilience and Regulatory Reforms
*Despite the uncertainty, banks have remained resilient, reflecting the strength of post-global financial crisis reforms and underscoring the importance of implementing the Basel III capital rules.
(Reporting by Michelle Price; Editing by Chizu Nomiyama )
