The Committee on the Global Financial System published a report on “Financial stability and local currency bond markets”, pointing out that the rapid development of local currency bond markets had strengthened the financial systems of many emerging market economies. Currency mismatches, the cause of so many earlier crises, have been eliminated or substantially reduced.
Nevertheless, operational risks inevitably arise in a transitional period when nascent markets still lack those features that help the more mature markets to work well even in volatile conditions. This report therefore examines several important challenges in ensuring that comparatively new bond markets function in ways that contribute best to financial stability and economic progress
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