Global Financial Stability

Theme Leaders:  Jiangfeng Shen, Qihe Tang, and Zhaoxia Xu, in collaboration with the Bank for International Settlements and the Stern Business School, NYU.

As the processes of globalisation and financial globalisation have progressed in recent decades, the need for a global financial system that can create a more inclusive, efficient, transparent and effective global financial system has intensified.

The IGF and its collaborators have been addressing issues that enhance the certainty, efficiency, and transparency of national, regional, and global financial systems. The IGF has published, in collaboration with key policymakers and researchers—including those from the Bank for International Settlements, the Federal Reserve of New York, the Bank of England, the Reserve Bank of Australia, and the Asian Development Bank—several works that contribute to the debate and analysis of the global financial system, which could help mitigate the impact of future global financial shocks and crises. The IGF has also released numerous research papers on regional and global financial integration. It has been active in the media on this vital theme and is playing a significant role in raising public awareness of the importance of a stable global financial system and the factors that foster more effective, resilient, and inclusive regional and global financial systems in the 21st century. 

In recent time, one of the major concerns for policymakers regarding financial markets is the current fragile functioning of hedge funds, which are unregulated and have been growing rapidly in recent years. Hedge funds must meet margin calls in response to stock and/or bond market reactions, as has been recently observed. At the same time, further bad news may lead to significant disruptions in the global financial system within a short period. The fact that hedge funds have leverage of 30 or more times the value of their assets, along with the fragility of money market funds and the recent support for unregulated cryptocurrencies, has created major global challenges.

The current global financial system has become far more complex in the post-GFC era and is yet more fragile. The IGF intends, in collaboration with its major partners, including the BIS and RBA, to expand its current studies and analyses of the forces of the current global system, taking into account unregulated financial institutions and entities. 

The IGF aims to expand collaborative research with NYU Stern Business School, including the Volatility and Risk Institute and the BIS, on issues that reduce future global systemic risks and promote global financial stability.

It aims to continue the ongoing research with the BIS on the opportunities and risks of AI technology in finance and banking, and to publish the findings. 

The IGF builds upon the IGF’s relevant research and publications and continues collaborating with NYU and the BIS to better analyse the implications of financial risks posed by unregulated financial firms within an interconnected global financial system.