Financial Stability Review 2023 I

(Ensure cookies are turned "on" to load the video above) | Transcript of the video "Risks and Outlook for the Financial System (June 2023)"

Risks to the global economy remain elevated, stemming from high inflation and the necessary monetary policy response, a tightening of financial conditions and geopolitical fragmentation. The global financial system remains vulnerable to disorderly market adjustments after a decade of elevated risk-taking, as evidenced by recent turbulence in the global banking system, and market volatility could be amplified by the behaviour of non-bank financial intermediaries. Domestically, persistent inflation and higher interest rates could lead to slower growth and expose vulnerabilities, particularly in CRE markets. Households and businesses are, in aggregate, proving resilient to the inflationary shock so far, owing in part to the significant reduction in private indebtedness over the past decade. Domestic banks currently have headroom above regulatory capital and liquidity requirements which provides capacity to absorb shocks, while profitability is expected to benefit from rising net interest income. In this context, the Central Bank is continuing as indicated in December to increase the CCyB from 1 to 1.5 per cent. This will contribute to the resilience of the banking system to adverse shocks.

See also:

• Previous Financial Stability Reviews
• Press Release on Financial Stability Review
• Opening Remarks by Governor Makhlouf FSR 2023 I
• FSR 2023 I Presentation
• FSR Analyst Transcript