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G20 Financial Watchdog Reflects on Banking Turmoil





Date Published:
Author: CML News

Lede

The Financial Stability Board (FSB) of G20 stated that the banking sector turmoil was prevented by the rules established after the 2007-2009 crisis, but the board will continue to monitor the situation as the outlook has become more challenging.

 

Summary

  • FSB rules introduced after the global financial crisis prevented contagion from the latest banking sector turmoil.
  • Rules established to better capitalize banks and resolve them quickly in a crisis without public aid.
  • US authorities handled the collapse of Silicon Valley Bank and Switzerland engineered UBS's forced takeover of Credit Suisse.
  • FSB Chair Klaas Knot stated that without the reforms, stress faced by individual banks could have led to broader contagion.
  • FSB has highlighted vulnerabilities linked to elevated debt levels, business models based on low-interest rates, stretched asset valuations, and the combination of leverage and liquidity mismatches in non-bank financial intermediation.
  • Knot said these vulnerabilities are sensitive to rising interest rates and a slowing economy.
  • The FSB will carefully analyze recent events to learn from them.
  • The board remained committed to delivering work on crypto assets, non-bank financial intermediation, and climate change.

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