Globalization : “To be robust, the financial system must be able to withstand unpleasant surprises “

[On the occasion of the 40 years of the Centre for prospective studies and international information (CEPII), experts have explored different scenarios for globalization]

Forum. The global economy is currently in good health, with a positive outlook. Favourable economic conditions, high inflation and low interest rates contribute to the valuation high of the financial markets. But they can also make the actors of the market overly optimistic, fueling the rising risks to financial stability. To ensure the robustness of the financial system, it is necessary to have sufficient reserves against unexpected events and to ensure that the reforms are not diluted.

The markets anticipate a gradual rise in interest rates. This would enhance the stability of the financial system : banks conforteraient their intermediation margin, in particular if the interest rate out permanently from the negative territory. Insurers and pension institutions escape more easily the income necessary to achieve the promised returns.

But how will the markets react to an unexpected slowdown ? What would happen if rates remained low for much longer ? If risk of significant political materialise, bouncing the risk premium ? Such unexpected events could affect a large number of market actors simultaneously, which could threaten the proper functioning of the financial system as a whole.

At the origin of considerable damage

History teaches us that financial crises arise most often unexpectedly. They can be at the origin of considerable damage to the economy and society – the production decline, increased unemployment and public debt climbs.

To be robust, the financial system must be able to withstand unpleasant surprises. …

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