Financial stability risks remain elevated due to stretched asset valuations, sovereign bond market pressures, and the growing role of nonbank financial institutions (NBFIs).
Structural vulnerabilities in global foreign exchange and emerging market bond markets can amplify shocks, including currency mismatches, concentrated dealer activity, and high NBFI participation.
Emerging markets have shown resilience through increased local currency sovereign bond issuance, but risks persist from heavy borrowing and narrow investor bases.
Rising geopolitical tensions, government debt, and the expansion of stablecoins further increase systemic risks.