Global financial System:

The global financial system consists of financial markets and intermediaries that today are globally linked through a vast international telecommunications network, so that the trading of securities and the transfer of payments go on virtually round the clock. The global financial system consists of the financial markets including the foreign exchange, fixed income and equity markets as well as the new and growing markets for derivative securities. The global financial system and the world economy are slowly regaining their health, thanks in large part to unprecedented interventions by governments, but the sharp rise in government debt during the economic crisis from already elevated levels helped create what the IMF says is the newest threat to the financial system: growing sovereign risk. In a wide-ranging assessment of the state of the global financial conditions, the IMF report said that improving economic and financial conditions have helped private bank balance sheets in advanced economies. The IMF sharply reduced its estimate of the write downs or loan loss provisions banks will have to take or have taken to account for bad loans and securities on their books. The improving quality of bank assets means that banks will probably need less capital than previously estimated to absorb losses. But banks still will face funding difficulties in the next few years, as their bonds mature and the special government assistance programs are withdrawn. The Committee on the Global Financial System (CGFS) has a mandate to identify and assess potential sources of stress in global financial markets, to further the understanding of the structural underpinnings of financial markets, and to promote improvements to the functioning and stability of these markets. It fulfils this mandate by way of regular monitoring discussions among CGFS members, through coordinated longer-term efforts, including working groups involving central bank staff, and through the various reports that the CGFS publishes. The CGFS also oversees the collection of the BIS international banking and financial statistics.