Commodity swings could have exaggerated impact on economy, says G20 watchdog
A G20 financial watchdog said on Wednesday that the commodities market should be closely monitored after the Russian invasion of Ukraine sent energy and metals prices soaring, having an exaggerated impact on the economy. economy.
The Financial Stability Board (FSB), which groups together regulators and financial and central bank authorities in the Group of 20, said it was now trying to identify vulnerabilities in commodity markets.
“Volatility in commodity markets following Russia’s invasion of Ukraine highlighted the risk of financial strains in these markets – through large margin calls, undetected leverage and concentrated exposures,” said Board Chairman Klaas Knot, who also is head of the Dutch central bank.
While commodity markets have weathered significant volatility with no major disruptions beyond London nickel trading, close monitoring is required, the FSB said.
“The centrality of major energy, metals and food commodities to the functioning of the global economy means that any disruptions to funding for producers or traders in these markets could have a disproportionate impact,” added Knot.
There will be “in-depth analysis” of commodity traders’ behaviors, for example, to identify how tensions in the sector could spread more widely, he said.
Knot said countries must keep pace in addressing the financial risks of climate change. “Current developments should reinforce, rather than diminish, international sustainability ambitions,” he said.