Carstens and co-authors warn of gathering financial storm in new G30 report
Updated
Updated · Interest.co.nz · Apr 23
Carstens and co-authors warn of gathering financial storm in new G30 report
7 articles · Updated · Interest.co.nz · Apr 23
The report highlights rising risks from non-bank financial intermediation, soaring public debt, and stalled post-2008 regulatory reforms across major economies.
Authors warn that vulnerabilities are most visible in private credit, with accelerating retail redemptions and recent bankruptcies like First Brands and Tricolor underscoring systemic risks.
They urge stronger regulation, improved data sharing, and pre-planned central bank liquidity facilities, noting that political will and international cooperation are essential to avert a new financial crisis.
If a new crisis hits, are central banks prepared to bail out the opaque and highly leveraged non-bank industry?
The 2022 UK crisis was a preview. Which major economy's bond market will be the next one to break?
As US debt surges towards 140% of GDP, are Treasury bonds shifting from the world's safest asset to a systemic risk?
Regulators warn of a 'perfect storm,' but can they act before political resistance sinks essential reforms?
How is the ongoing Middle East conflict directly fueling inflation and pushing the global financial system closer to the edge?
The Growing Threat of Leverage and Liquidity Mismatches in NBFI: Insights from 2022–2025 Market Crises
Overview
Between 2022 and 2025, major shocks in the UK gilt and US Treasury markets exposed critical vulnerabilities in the non-bank financial intermediation (NBFI) sector. The UK crisis began with a fiscal policy announcement that caused sharp falls in gilt prices, collapsing the net asset value of highly leveraged Liability-Driven Investment funds. Forced selling by these funds worsened market liquidity, prompting the Bank of England to intervene with a large bond-buying program. Similarly, in 2025, US tariff announcements triggered uncertainty and a rapid sell-off in Treasuries, amplified by leveraged NBFI players unwinding positions, which severely strained market liquidity. These events highlight how leverage, liquidity mismatches, and interconnectedness within NBFI can quickly escalate shocks, threatening financial stability.