In a letter released ahead of the February 28-29 G20 Finance Ministers and Central Bank Governors meeting, Financial Stability Board (FSB) Chair Klaas Knot expressed concerns over the challenges in maintaining global financial stability. Despite modest economic growth and indications of easing financial conditions, Knot's outlook remains tumultuous.
As per an FSB press release, Knot anticipates increasing challenges in areas such as commercial real estate and asset valuation. He also highlighted that sudden shifts in market pricing could expose additional weaknesses in the financial system. These weaknesses may include those arising from leverage and liquidity mismatch in non-bank financial institutions (NBFIs).
The same press release outlines that Knot's letter provides an overview of FSB’s 2024 plan to monitor and address vulnerabilities within the financial system. For instance, it intends to implement the international framework from the FSB Key Attributes of Effective Resolution Regimes and manage stability risks emerging from leverage in NBFIs. Moreover, the FSB will scrutinize the impacts of tokenization and artificial intelligence on financial stability. It also plans to tackle increasing stability risks related to cyber incidents, currently developing a format for Incident Reporting Exchange (FIRE) for public consultation.
Knot stated in his letter that the FSB aims to continue coordinating international work through various roadmaps. These include the FSB Roadmap addressing financial risks from climate change, the G20 Roadmap for enhancing cross-border payments, and the G20 Roadmap on crypto-assets. Additionally, at the July G20 meeting, FSB plans to deliver a stocktake on regulatory and supervisory initiatives aimed at identifying and evaluating nature-related financial risks.
According to information available on the G20 Brasil 2024 website, São Paulo, Brazil is set to host the February G20 meeting.