The US Federal Reserve warned Friday that the financial sector faces 'significant' vulnerabilities due to the coronavirus pandemic, as businesses ...
WASHINGTON: The US Federal Reserve warned Friday that the financial sector faces"significant" vulnerabilities due to the coronavirus pandemic, as businesses and households grapple with fragile finances for the foreseeable future.
It is the latest signal from the Fed that the recovery from the COVID-19 crisis will be arduous. Since the downturn began, Fed officials have noted with some relief that the financial system was not the source of the current problem, and with some help from the central bank had continued functioning.
In short, no one from hedge funds to major banks to households would be immune from the risk they might default on debt, be forced to sell off assets, end up in bankruptcy, or see the value of assets dwindle.It won't happen tomorrow, and the report noted that steps taken to shore up the financial system after the last crisis created buffers that, alongside emergency steps taken by the Fed, have avoided the worst.
But she also highlighted a key worry at the central bank: that what might start as a cash crunch could spiral into something worse. Among highly indebted businesses, she said,"we will be monitoring closely for solvency stresses ... which could increase the longer the Covid pandemic persists."
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