Global group sees risk landscape evolve, new vulnerabilities emerge.

The Financial Stability Board (FSB) is flagging risks posed by the fast-growing private credit markets as an emerging threat to the global financial system.

Following two days of meetings in Riyadh, Saudi Arabia, the global policy group said its members discussed the evolution of vulnerabilities in the global financial system since their previous meetings in June — including the risk of a sharp market correction, particularly in the securities of AI-driven companies with soaring valuations. 

“The possibility for borrowing conditions to tighten, especially for riskier companies, was also a concern given the uncertain global economic outlook,” the FSB said, adding that rising government debt levels could adversely affect financial resilience too. 

The private credit markets were also singled out by policymakers, it noted.

“While acknowledging that private markets are improving access to credit, members noted their rapid growth, complexity, relative lack of transparency, and growing connections to the banking sector and the rest of the financial system, which require careful monitoring to assess potential risks to financial stability,” it said.

Against that backdrop, the FSB discussed options for policy work on private credit in the coming year, including efforts to assess growing vulnerabilities and interlinkages, along with work to address gaps in data on these markets.

The group also endorsed further work to “promote implementation of the FSB’s recommendations on liquidity management by open-ended funds” and on leverage at non-bank financial institutions — including work to improve disclosure by non-banks to their prime brokers.

And, it called for more progress to enhance data on leveraged trading strategies in sovereign bond markets, amid concerns that these strategies “could amplify market volatility and instability, potentially across borders, in the event of a rapid unwinding of positions.”

Additionally, the group called for close monitoring of the growing connections between the crypto sector, particularly stablecoins, and the broader financial system. 

“Stablecoins may improve payment speed and efficiency, but they raise a number of vulnerabilities, including run risk and regulatory challenges associated with multi-jurisdiction issuers of stablecoins, which require continuing attention,” the FSB said.

Other policy priorities for the year ahead include work on enhancing cross-border payments, the framework for resolving failing banks, and the identification of global systemically-important insurers.

Andrew Bailey, governor of the Bank of England and chair of the FSB, said the meeting marked “a significant step for the FSB.” 

“Our members have agreed to focus the work of the FSB to respond to changes in the pattern of financial stability vulnerabilities, the adoption of innovation, and to ensure a stable financial environment to facilitate economic growth,” he said in a release. “Our 2026 agenda of work is demanding, but we remain committed to closely scrutinizing vulnerabilities in the market and resolutely following up to ensure the implementation of our recommendations across the globe.”