High interest rates may impact borrowers' debt service capacity: FSB to G20

High interest rates may impact borrowers' debt service capacity: FSB to G20

Ahead of the G20 Summit here, Switzerland-based Financial Stability Board (FSB) on Tuesday warned that higher interest rates alongside a slowing growth outlook, could impair the capacity of borrowers to service historically high levels of debt.

The FSB has published two letters from its Chair, Klaas Knot, to G20 Leaders ahead of their Summit in New Delhi on September 9-10.

The first letter outlines the work FSB has undertaken under the Leadership of India's G20 Presidency to address existing vulnerabilities in the financial system and enhance the resilience of the financial system to structural change.

The second letter provides to G20 Leaders an update on the G20 Cross-border Payments Roadmap.

FSB, in its communication to G20 leaders, stressed that a resilient and stable financial system is indispensable to sustaining economic growth, particularly in the current environment.

FSB notes the challenging backdrop of strong and persistent inflation and slowing growth, and warns that rising interest rates could impair the capacity of borrowers to service the historically high stock of global debt.