##banks. salient near - term risks let me illustrate how these vulnerabilities factor into my views on the resilience of the financial system. i will walk through how potential near - term risks could interact with current conditions in the united states. i will cover both domestic and international risks in a way that is closely aligned with the discussion in the fsr. 6 in recent outreach, as summarized in this figure from the fsr, contacts were particularly focused on the persistent inflationary pressures leading to further monetary tightening, the potential for significant losses on cre and residential real estate, the reemergence of banking - sector stress, and market liquidity strains and volatility. based in part on the outreach survey the federal reserve bank of new york conducts that informs the discussion in the fsr. see section 5 and the box “ survey of salient risks to financial stability ” in board of governors of the federal reserve system ( 2023 ), financial stability report ( washington : board of governors, october ), pp. 47 – 48, https : / / www. federalreserve. gov / publications / files / financial - stabilityreport - 20231020. pdf. - 8as i said earlier, the banking sector has stabilized since the period of acute stress earlier this year, and the system as a whole has ample capital and liquidity to withstand shocks. i continue to monitor the system for signs of renewed stresses. i also support seeking public comment on federal banking agencies ’ basel iii endgame proposal on bank capital requirements. in addition, nbfis have become an integral part of the financial system and are increasingly interconnected with the banking sector. it is crucial for relevant authorities to implement stronger oversight and appropriate prudential requirements for nonbanks. this is especially important amid concerns that proposed higher capital requirements for large banks could cause some bank activities to migrate to the more lightly regulated nbfis. it would be the most effective and balanced way to enhance the stability of the entire financial system. internationally, inflationary pressures persist in advanced foreign economies and could pose risks to the global financial system. energy prices have increased notably in recent months, potentially forcing businesses to pass on renewed cost pressures to customers. an unexpected increase in policy rates abroad could lead to heightened volatility in financial markets, strains in market liquidity, and an adjustment in asset prices. higher interest rates, particularly if they persisted, could be a binding constraint on the debt - servicing

capacity of foreign households, businesses, and governments. collectively, these factors could lead to pronounced losses among global financial intermediaries and a consequent reduction in the credit supply. in china, a further slowdown in economic growth could worsen financial stresses. many chinese firms, especially in the property sector, are struggling to service very high - 9debt burdens. local governments are also facing increasing fiscal strains. stresses originating in china could spill over to other emerging market economies ( emes ), particularly those highly dependent on trade with china or on credit provided by chinese entities. the spillovers could trigger significant capital outflows from emes, which may already be more susceptible to external shocks given generally heightened debt levels. given the size of its economy and financial system, financial stress in china could be propagated to global markets more broadly through disruptions to economic activity, deterioration of risk sentiment, and a sharp appreciation of the dollar. last but not least, a worsening of global geopolitical tensions, including those involving russia, the middle east, and china, could lead to broad negative spillovers to global markets. russia ’ s ongoing war against ukraine continues to weigh on many economies in a variety of ways, including sustained disruptions to regional trade in food, energy, and other commodities. the conflict in the middle east could generate further risks to energy and financial markets, as well as a worsening of global humanitarian and migration challenges. more broadly, escalation of geopolitical tensions could lead to lower economic activity and increased fragmentation of global trade flows and financial intermediation, raising financing and production costs and contributing to more sustained supply chain challenges and inflationary pressures. the global financial system could be affected by a pullback from risk - taking, declines in asset prices, and losses for exposed businesses and investors. i will conclude by saying that we must remain vigilant to potential shocks that could exacerbate vulnerabilities in the global financial system. thank you for inviting me to speak here. i look forward to participating on the panel. financial stability : resilience and challenges lisa d. cook member board of governors of the federal reserve system central bank of ireland november 8, 2023 the views expressed here are my own and do not reflect those of the board of governors or the federal open market committee