The COVID-19 pandemic ranks as the greatest threat to global financial stability in 2021 according to a new survey published by The Depository Trust and Clearing Corporation (DTCC). Nearly one third (31%) of survey respondents cited the pandemic as the top risk, with two thirds (67%) citing it as a ‘top 5’ risk.
More specifically, when asked how the COVID-19 pandemic may affect financial stability, 68% of respondents cited concerns that equity valuations are stretched. This reflected unrealistic expectations about the economy’s recovery.
Nearly the same percentage of respondents (67%) believed that fiscal stimulus measures, while effective at preventing a short-term economic collapse, may have unintended consequences that could prove disruptive to financial stability in the longer run.
A majority of respondents (55%) expect market volatility in 2021 to be substantially higher than historical averages. Similarly, 42% of respondents expect systemic risk and financial instability to be worse in 2021 than in 2020.
Commenting on survey results, DTCC group chief risk officer said, “It is safe to say that 2020 can be classified as a year that defied predictions. As the coronavirus spread around the world in March, we saw unprecedented volatility and trade volumes across nearly every asset class.
“Despite these challenging conditions, financial market infrastructures around the world have proved resilient, demonstrating their crucial role in safeguarding financial stability.”