Pandemic aftershock risks still loom over financial system: FSB

By James Langton | October 27, 2021 | Last updated on October 27, 2021
2 min read
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While it feels like the power of the pandemic is receding, it remains the primary threat to global financial stability, according to the Financial Stability Board (FSB).

In its latest annual report, the global policy group said the outlook for financial stability “continues to be dominated” by the pandemic — with uneven recoveries across both economies and sectors.

Inflated asset valuations and high debt levels, and the weight of extraordinary fiscal and monetary policy responses to the crisis, continue to pose key vulnerabilities, the report said.

“A rapid tightening in financial conditions following a strong bounce-back in the global economy, or a strong resurgence of the pandemic leading to another round of strict lockdowns, could trigger these vulnerabilities,” the FSB warned.

At the same time, the FSB said that the pandemic has provided an important test of the G20 reforms that were adopted in the wake of the 2008 financial crisis, reinforcing the importance of global cooperation among regulators — and the need to complete the implementation of those reforms.

Yet, over the past year, there has been “limited progress” on the adoption of G20 reforms, the report said, as policymakers have been preoccupied with their responses to the pandemic.

“Implementation of the final reforms to the capital framework is still at a very early stage,” the FSB said. “More work is also needed to close gaps in the operationalisation of banks’ resolution plans and to implement effective resolution regimes for insurers and central counterparties.”

Other priorities for the FSB include enhancing the resilience of the shadow banking sector, and monitoring cybersecurity, risks from “global stablecoin” arrangements, and climate-related financial risks.

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James Langton

James is a senior reporter for and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.