Covid-19 still poses a risk to the financial system, says Fed report

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Assets at risk in the United States are “vulnerable to significant losses” arising from a possible scenario of deteriorating risk sentiment, worsening of the coronavirus pandemic or stagnation of economic recovery.

The diagnosis is from the Federal Reserve (Fed, the American central bank) and appears in a semiannual financial stability report, released this Monday (8).

The monetary authority highlights that asset prices were supported by an increase in earnings expectations and low interest rates on Treasuries. According to the document, the banks remain profitable and well capitalized, despite some uncertainties left by the covid-19 crisis.

The Fed also points out that corporate balance sheets benefited from continued improvement, low interest rates and government support. “However, the rise of the delta variant appears to have delayed improvements in prospects for small businesses,” he explains.

The analysis adds that home prices have “increased significantly” since May, but that there is “little evidence” of deteriorating credit standards.

According to the US BC, “structural vulnerabilities” persist in some money market funds and other money management vehicles, which could amplify potential shocks to the financial system. “There are also financing risk vulnerabilities in the growing stablecoin sector”, he points out.

Reference: CNN Brasil

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