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The letter notes that the Russian invasion of Ukraine triggered large price fluctuations in global financial markets. Thus far, the global financial stability impact of the war in Ukraine appears limited compared to the turmoil induced by COVID-19 in March 2020. Nevertheless, uncertainty remains high. Inflation is back, and with it (the prospect of) tighter financing conditions. This has the potential to crystallise vulnerabilities that have been building for some time, such as high debt levels in the non-financial sector and stretched valuations.

The letter flags a number of issues that warrant particular attention, including linkages between commodity markets and the rest of the financial system; financial system leverage and possible amplifiers in the event of market stress; and cyber risks. In addition, for many emerging market and developing economies heightened geopolitical tensions and rising energy and food prices are adding to the economic strain from COVID-19, reduced policy space and tightening global financial conditions. The FSB's forthcoming report on US dollar funding and EME vulnerabilities draws policy implications to address vulnerabilities related to external financing.

The FSB is intensifying monitoring of current market developments and emerging vulnerabilities, with a particular focus on commodity markets, margining and leverage. The FSB's ongoing work for the G20 on exit strategies from COVID-19 and measures to avoid scarring effects will also consider the possible implications of current developments for financial policies.

Meanwhile, the Russia-Ukraine war has reinforced concerns about the growth and potential use of crypto-assets. The FSB is taking forward work on the regulation and supervision of 'unbacked' crypto-assets and 'stablecoins'.

Finally, the letter stresses the importance, and increased urgency, of the FSB's ongoing policy work on addressing the financial risks from climate change.