At its meeting in Hong Kong, the Financial Stability Board (FSB) discussed vulnerabilitiescurrently affecting the global financial system and the progress in authorities’ ongoing work to strengthen global financial regulation.
Vulnerabilities in the financial system
After a period of calm in financial markets earlier this year, tensions have increased more recently and risk aversion has returned to elevated levels. In the euro area, the adverse feedback loop between sovereign debt strains, weak economic growth and fragile banking systems has intensified. There has been a pull-back in cross-border financial activity. Against this background, risks of adverse spillovers to global financial markets and economies have increased.
The FSB supports the work of European and national authorities to lower short-term risks and foster lasting confidence and stability, including completing the repair and restructuring of some banks as required. In addition, authorities agreed to work together to minimise the downside risks from the ongoing process of bank deleveraging.
All FSB members remain committed to strong cooperation to support market functioning. Central banks, supervisors and treasuries are maintaining close dialogue and cooperationduring this period of heightened uncertainty.
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