Interconnectedness and Systemic Risk

Theme Leaders: Fariborz Moshirian, Zhaoxia Xu, Romero-Cortes, in collaboration with Viral Acharya (NYU), Anthony Saunders (NYU),  the NYU Volatility and Risk Institute and the Bank for International Settlements

The process of globalisation, since the mid-nineteenth century,  has led to an increasingly interconnected world and international system. Despite the many weaknesses of the current international framework, numerous global challenges and opportunities are borderless and interconnected. This indicates a need to reconfigure elements of the international system to enhance resilience against global shocks and crises. Additionally, an international system should facilitate collaboration from local to global levels to increase global public goods, which serve as antidotes to many current global challenges and opportunities.   

The IMF has recently stated ( March 2025) that large global systemically important financial institutions may have been underestimating the “true level of risk” associated with their global business activities. Consequently, due to the complex nature of the global financial system, the risks related to large banks have increased, reminding the main players of the collapse of Lehman Brothers, which led to global systemic risk. 

The IGF will carry on its long-standing research and collaboration with policymakers, the business community, and the media on strategies to enhance resilience in the global banking system, reduce the risk of future financial crises, and develop a more resilient financial system overall. The IGF continues its joint projects with the NYU Volatility and Risk Institute.  To do this, the IGF intends to provide improved real-time data and advanced technology to measure and assess issues related to global systemic risk for financial institutions, while accounting for the “true level of risk” of large banks and insurance companies. The live financial data available on the IGF website acts as part of a warning system designed to signal and help prevent potential future financial shocks and/or possible national and global financial crises. 

The IGF and its key international partners, including leading academics and policymakers like the Bank for International Settlements, Federal Reserve Bank of New York, Bank of England, Reserve Bank of Australia, and the Asian Development Bank, have produced several influential publications on issues related to global systemic risk. The IGF plans to continue its current policy research on systemic risks and interconnectedness and share its findings with policymakers, financial markets, and researchers.

Major central banks, including the RBA, have highlighted the connection between climate risk and both global and national financial instability, as well as potential systemic risks over time. In a book jointly published by the Asian Development Bank and the IGF prior to COP28, three senior officials from the RBA wrote a chapter emphasising this link.

The IGF intends to continue its current collaboration  with NYU and expand V-Lab's current work on climate risk by utilising more interconnected information and data, considering the heightened global financial risks and their effects on real estate, financial portfolios, and banks' balance sheets.

The IGF intends to enhance the current collaborative research with NYU to include the financial risks and potential global systemic risks associated with inadequate reporting of financial risks for large systemically important financial institutions.
The IGF is invited by the NYU Volatility and Risk Institute to collaborate in developing a global network of sustainability and risk measures that could enhance the capabilities of policymakers and financial market regulators in better understanding potential global systemic risks, including those from the banking system and climate risks, and in providing countermeasures to mitigate such risks.