The Financial Stability Board, the international body that monitors the global financial system, is of the opinion that the world’s financial markets, as a result of G20 regulatory reforms, is more resilient. The board, which released a report this week highlighted the implications to the world’s financial stability relating to the coronavirus pandemic and what policies it will take to deal with them.
Based on the report, the FSB believes that COVID-19 is the largest financial markets test since the global financial crisis. However, it also feels that since implementing regulatory reforms taken by the G20 that the markets are far better position to manage the crisis.
The FSB, in particular, mentioned five principles that it believes will minimising risk, retain financial stability and support the economy during this time. These include:
- sharing and monitoring information quickly to address and access COVID-19 financial stability risks;
- identify and use the flexibility designed into financial standards that exist to support their response;
- find opportunities to reduce temporarily operational burdens on authorities;
- consistently act within the framework of international standards, and not compromise or roll back reforms in place that defy the objectives of current international standards;
- coordinate in a timely manner the wind down of temporary measures that have been taken in response to COVID-19.
Commenting on the five principles, the FSB stated; “The COVID-19 pandemic represents the biggest test of the post-crisis financial system to date. The global financial system faces the dual challenge to sustain the flow of credit amidst declining growth and manage heightened risks. Nevertheless, the global financial system is more resilient and better placed to sustain financing to the real economy as a result of the G20 regulatory reforms in the aftermath of the 2008 global financial crisis.”
The Financial Stability Board monitoring resilience of market during COVID-19
In its response to COVID-19, the Financial Stability Board stated that the board is monitoring the key nodes in the financial system to gauge its resilience. This includes markets and financial institutions ability to direct funds to the real economy, the access to USD funding by market participants, the capabilities of financial intermediaries managing liquidity risk as well as the monitoring of financial market infrastructures and how they manage evolving risks.