Global Financial System Risks Remain Modest Despite Uncertainty

By Mubasher

 As global financial markets are facing risks amid mounting volatility and market turbulence, the threat level to the overall financial system remains mild, according to Moody’s Investor Service.

Despite the pressures, the global financial system remains relatively healthy, the New York-based rating agency said in a new report.

Equity markets saw big sell-offs by the end of last year, after escalation in the trade conflict between the US and China and heightened uncertainty over the Brexit negotiations dragged investor morale down, triggering financial market volatility, the rating agency added.

The S&P 500 index finished last year down by 6.2%, while the Eurostoxx, FTSE 100 and Nikkei 225 fell by 14.7%, 12.5%, and 12.1% respectively.

Moreover, the rising market uncertainty was also mirrored on wider global credit spreads.

“In particular, rising political risk in Europe contributed to higher corporate credit spreads in Europe than in the US in the second half of the year,” the report says.

However, “overall, market conditions have tightened recently on the back of widening credit spreads, rising market volatility and tightened market liquidity, but in our judgement systemic risks as a whole still remain moderate,” Moody’s chief credit officer Colin Ellis said in a statement.

Most specifically, banks are better poised to withstand stressed markets than three years ago.

This article provided by NewsEdge.