The Quantum Ledger - our economic environment

Here is a summary of FSB annual report

(full report is attached if you want to read it)

• Persistent vulnerabilities in the global financial system include elevated asset valuations, private sector debt issues, and emerging market pressures from capital flow volatility.

• Structural changes, including the rise of non-bank financial intermediation (NBFI), cyber risks, and climate-related financial risks, pose additional threats.

Priority Areas and New Initiatives

1. Lessons from March 2023 Banking Turmoil:

2. Highlights weaknesses in solvency, liquidity management, and depositor behavior influenced by technology and social media.

3. Calls for better planning and execution of bank resolutions.

4. Resilience of Non-Bank Financial Intermediation (NBFI):

5. Rapid growth of NBFI necessitates enhanced policies for liquidity, leverage, and systemic risk monitoring.

6. Climate-Related Risks:

7. Progress on climate-related financial risk management is uneven; more work is needed on data quality, risk analysis, and policy implementation.

8. Cross-Border Payments:

9. Improvements aim to reduce cost, increase speed, and enhance transparency; progress is mixed and requires further international cooperation.

10. Technological Innovation Challenges:

11. Risks from AI, tokenization, and cybersecurity demand improved oversight and response strategies.

12. Central Counterparties (CCPs):

13. New global standards are introduced for the orderly resolution of systemically important CCPs.

Implementation and Effects of Reforms

• Building Resilient Financial Institutions:

• Basel III reforms have strengthened bank resilience but require full and consistent global implementation.

• Ending Too-Big-to-Fail:

• Progress is noted in loss-absorbing capacities, but gaps remain in resolution planning for non-bank institutions.

• Making Derivatives Markets Safer:

• Significant advancements in trade reporting and margin requirements, with lingering legal and operational barriers.

• Enhancing NBFI Resilience:

• Policies to address money market funds and securities financing transactions are being implemented unevenly.