COVID-19: financial stability impacts
The COVID-19 pandemic represents the biggest test of the global financial system since the 2008 financial crisis. The financial system faces the dual challenge to sustain the flow of financing to the real economy and preserving financial resilience.
The COVID-19 shock has put the global financial system under considerable strain. While the core of the financial system entered the crisis more resilient, the COVID-19 shock in March led to severe liquidity stress in the system.
Global financial conditions have overall continued to ease on the back of the decisive policy action taken earlier this year since the last G20 meeting in July. However, risks to global financial stability remain elevated.
Deteriorating credit quality of non-financial borrowers poses risks to the financial sector. The intensification of the pandemic, together with the resulting necessary government containment measures as well as greater uncertainty about the duration of the pandemic, is increasing vulnerabilities in the non-financial sector.
FSB members assess financial risks and vulnerabilities related to COVID-19 on an ongoing basis. The FSB reports regularly to the G20 on the financial stability implications of, and policy measures taken in response to, the pandemic.