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WASHINGTON :
The world financial system stays susceptible to additional liquidity stresses and a possible “sudden and sharp” market repricing as economies proceed to reel from the COVID-19 pandemic, the Financial Stability Board (FSB) warned on Wednesday.
Writing to G20 finance ministers and central financial institution governors forward of their digital assembly on July 18, FSB chair Randal Quarles stated world financial markets had responded effectively to a slew of decisive measures aimed at bolstering system-wide liquidity, however that policymakers couldn’t be complacent.
“The crisis is far from over and we must not lose sight of the hard work we must do together to support global recovery,” wrote Quarles, who can also be vice chair of the U.S. Federal Reserve, which has taken a raft of measures to maintain low-cost cash flowing and prop up ailing firms.
The FSB, a global physique that coordinates regulation for the Group of 20 main economies, additionally on Wednesday revealed a report that assessed COVID-associated financial stability developments and descriptions mandatory response measures.
“While improving market sentiment has lifted risky asset prices, this may not fully reflect the fact that the pandemic continues and the path of recovery remains highly uncertain. As a result, risky assets remain vulnerable to shifts in the economic outlook,” the report says.
The group famous that top ranges of company debt have grown as firms have borrowed extra to navigate the disaster, elevating solvency considerations for some debtors. And whereas lending to the actual financial system has typically continued, banks “face a challenging combination of deteriorating credit quality and rising credit demand,” it stated.
The FSB added that it supported measures, taken by the Fed and European regulators, to permit banks to eat into their extra liquidity buffers to proceed lending and that supervisors have agreed that banks can be given ample time to revive them.
This story has been revealed from a wire company feed with out modifications to the textual content. Only the headline has been modified.
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