High interest rates could impair capacity of borrowers to service debt: FSB to G20 leaders
Financial Stability Board (FSB) on Tuesday warned that higher interest rates alongside a slowing growth outlook, could impair the capacity of borrowers to service historically high levels of debt. The FSB has published two letters from its Chair, Klaas Knot, to G20 Leaders ahead of their Summit in New Delhi on September 9-10.
The first letter outlines the work FSB has undertaken under the Leadership of India's G20 Presidency to address existing vulnerabilities in the financial system and enhance the resilience of the financial system to structural change.
The second letter provides to G20 Leaders an update on the G20 Cross-border Payments Roadmap.
FSB, in its communication to G20 leaders, stressed that a resilient and stable financial system is indispensable to sustaining economic growth, particularly in the current environment.
FSB notes the challenging backdrop of strong and persistent inflation and slowing growth, and warns that rising interest rates could impair the capacity of borrowers to service the historically high stock of global debt.
Knot called on authorities to closely monitor asset quality in those sectors most sensitive to higher interest rates, such as real estate. The letter highlights concerns over the build-up of leverage in the NBFI sector, described in a report being delivered to the Summit, and notes that addressing these risks will be a major focus of NBFI policy work next year.
The letter notes that accelerated digitalisation has been the emergence of crypto-assets, including so-called stablecoins.
A number of incidents over the past year have highlighted the vulnerabilities in the crypto-asset ecosystem, which warrant close monitoring given the growing linkages with the traditional financial
