Systemic Risk Report

In this edition, we highlight several key issues of lingering concern to the Council. Chief among them is the need to finalize and implement stablecoin rules in the US. The main risks involve potential stablecoin runs, where a loss of confidence could trigger panic withdrawals. Key issues include ensuring transparency and verifying stablecoin reserves, and meeting the often-stated policy objectives of preventing bad actors and illicit finance. In the end, stablecoins rely on confidence and trust. If users doubt the integrity of reserves or their ability to redeem holdings, it could lead to a run, destabilizing both the stablecoin and the wider financial system. 

In addition, the Council remains concerned about the lack of transparency and enormous growth in non-bank financial intermediaries (NBFIs) along with new concerns about recent reductions in capital adequacy ratios for large banks. It also worries that the global race to clarify and simplify regulations in the name of economic growth may lead to a race to the bottom in terms of systemic risk protections. Global regulators are welladvised to proceed with caution when undoing reforms that were implemented following the Great Financial Crisis. 

So far in 2025, markets have been driven more by political shifts and investor sentiment than economic fundamentals. The ongoing dynamics of geopolitical conflict, record-high valuations, and muted responses to traditional economic signals make systemic risk preparedness all the more difficult. It is essential to quickly identify and manage potentially systemic disruptions in an increasingly complex technological, geopolitical, and financial landscape.

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