On April 26, 2022, the Financial Stability Board released a report, US Dollar Funding and Emerging Market Economy Vulnerabilities (EMEs), outlining its findings of work in collaboration with the IMF on the interaction between US dollar funding and external vulnerabilities in emerging market economies. The collaboration with the IMF is part of the FSB’s work programme on non-bank financial intermediation, intended to enhance the resilience of non-bank financial intermediation (NBFI).

The report discusses EME vulnerabilities stemming from foreign currency borrowing, and necessary policy measures to address those vulnerabilities supported by analysis of EME capital flows during March 2020, with an emphasis on the non-bank investor roles. These measures include a concentration on the “build-up of foreign exchange mismatches"; enhancing crisis management tools; and addressing data gaps to "facilitate risk monitoring and the timely adoption of policies.” Generally, the report highlights EME vulnerabilities derived from external funding and non-bank financing, while illuminating the policy work that both the FSB and the IMF must do in their respective countries and internationally to increase EMEs resilience to “future shocks”.

More information on the report and EME vulnerabilities is available here and here.