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Shifting global economic conditions and tighter financial markets are posing increased risks to financial stability for the G20, the Financial Stability Board (FSB) warned in a letter to the group’s finance ministers and central bank governors.

Ahead of the G20’s upcoming meeting on July 15 and 16, the FSB outlined its current view on financial stability, which warned that the combination of lower growth, high inflation and tighter financial conditions, “may crystallize pre-existing vulnerabilities in the global financial system or give rise to new ones.”

The FSB also said it’s watching for signs that financial strains in global commodity markets are spilling over to the broader financial system.

At the same time, the FSB indicated that it’s continuing its work to bolster the resilience of the financial system in several areas, including addressing the economic damage inflicted by the Covid-19 pandemic, growing climate-related financial risks, and the emergence of the cryptoasset sector.

Among other things, the group warned that financial vulnerabilities that governments sought to address with robust support measures during the pandemic may now be exposed as both household and government finances are stretched by the deteriorating global economy.

As a result, it warned that, “… the scarring effects from the pandemic have a greater potential to damage future growth.”

On climate, the FSB said that it will publish a final report on supervisory and regulatory approaches to climate-related risks in October, and that its work on climate scenarios will be issued in November.

The FSB is also worried about the risk of recent turmoil in cryptoasset markets inflicting damage on the traditional financial system, and it reiterated its recent public stance that cryptoassets and crypto firms need to be regulated, and to adhere to existing legal and regulatory requirements that may apply to their activities.