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Federal Reserve Releases 2020 Financial Stability Report
- warns that vulnerabilities in the financial sector are likely to be significant in the short term
- pandemic tensions on household and business balance sheets have likely created a fragility that lasts for some time
- warns that the banking sector could be under stress due to economic and financial stocks
- Banks have so far been able to meet the demand for drawdowns on credit lines while increasing reserves for loan losses
- some hedge funds were severely affected by sharp falls in asset prices and volatility, contributing to market disruptions
- primary traders struggled to provide peak intermediation services
- asset prices could drop significantly if pandemic worsens
- financial markets were less fragile than in times of financial crisis but still suffered from tensions requiring intervention by the Fed
- High levels of corporate debt risk worsening the economic impact of a pandemic
- pandemic poses serious risk to businesses of all sizes and millions of households
- pandemic will cause a sharp increase in defaults on household debt
- long-term treasury bill and cash futures contract debt in March fell to an all-time low and has shown only modest improvements since
- mortgage advisers under pressure from forbearance could lead to lower mortgage credit and future failures
- further appreciation of the dollar could put additional pressure on US businesses that depend on exports and supply chains for their operations
- The risks of Covid 19, a Brexit without agreement, still present risks for the European and American financial systems
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