This letter was submitted to G20 Finance Ministers and Central Bank Governors ahead of their meeting on 20 April.
The letter notes that the Russian invasion of Ukraine triggered large price fluctuations in global financial markets, particularly commodity markets, where prices have swung wildly, with liquidity temporarily evaporating in some commodity derivatives market segments and a number of traders coming under strain, including from large margin calls. However, thus far, the direct global financial stability impact of the war in Ukraine appears limited compared to the COVID-19-induced turmoil in March 2020.
The letter lays out areas that warrant particular attention, including:
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linkages between commodity markets and the rest of the financial system
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commodities derivatives markets
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developing a comprehensive picture of leverage in the financial system
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cyber response and recovery capabilities
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vulnerabilities in emerging markets related to external financing
The FSB is responding to the current financial stability challenges through:
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Intensified monitoring of current market developments and emerging vulnerabilities, with a focus on the resilience of critical nodes in the global financial system.
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In-depth analysis and assessment of specific potential vulnerabilities, with a particular focus on commodity markets, margining and leverage
Finally, the letter notes that current financial stability challenges reinforce the importance, and increase the urgency, of the FSB’s ongoing policy work in a number of areas, including: the financial risks from climate change; strengthening the resilience of non-bank financial intermediation; as well as crypto-assets and cyber risks.