This presentation provides an updated overview of the state of global financial markets and risk transmission mechanisms related to the economic and financial consequences of the Russian invasion of Ukraine. Find out more at www.oecd.org/finance

1. GLOBAL FINANCIAL MARKETS
Impacts of the Russian invasion of Ukraine on
financial markets conditions and resilience
Committee on Financial Markets, 7 April 2022
OECD Directorate for Financial and Enterprise Affairs

2. Committee on Financial Markets
• The Committee on Financial Markets’ overarching objective is to promote efficient,
open, stable and sound financial systems, based on high levels of transparency,
confidence, and integrity, so as to contribute to sustainable and inclusive growth.
• The Committee’s core method to support this objective is through in-depth and
proactive surveillance of financial developments and analysis of their impact on
economic growth and stability.
• This presentation reflects the Committee’s current surveillance of global financial
markets and risk transmission mechanisms related to the economic and financial
consequences of the Russian invasion of Ukraine.
2

3. 3
Overview
Key financial markets developments
Assessment of risks and transmission channels
Risks to alternative finance markets
1
2
3

4. 1. KEY RECENT FINANCIAL
MARKETS DEVELOPMENTS
4

5. The Russian invasion of Ukraine contributed to a spike in commodity
prices that heightened short-term inflation expectations
The Russian invasion of Ukraine has prompted a
surge in commodity prices, particularly for
European gas, nickel and wheat as Russia and
Ukraine are major global exporters.
5
Short-term inflation expectations have risen
substantially, which may accelerate monetary
policy normalization and increase refinancing
risk.
Elevated commodity prices amid the Russian
invasion of Ukraine
Short-term market expected inflation rose
substantially in selected advanced markets
Source: Refinitiv.
Note: 1-year USD, EUR and GBP inflation linked swap rates.
Source: Refinitiv.
80
130
180
230
280
330
380
430
80
90
100
110
120
130
140
150
160
170
180
Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22
Price index
(100=Sep-2021)
Price index
(100=Sep-2021)
Brent Crude US WTI Oil
Wheat European Natural Gas (RHS)
Nickel (RHS)
1.5
2
2.5
3
3.5
4
4.5
5
5.5
6
Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22
%
United States Euro Area United Kingdom

6. Equity prices have rebounded, yet volatility remains higher in Treasury
markets amid expectations of higher inflation
Stock prices have rebounded in advanced markets
after an initial shock, but remain depressed in EMs
most exposed to Russia and Ukraine amid concerns
over the impacts of elevated commodity prices,
and weaker outlook for corporate earnings.
6
Market volatility across asset classes spiked
following the invasion of Ukraine but it has fallen
notably recently, except in Treasury markets as
investors are increasingly concerned about the
acceleration of monetary policy tightening.
Weakened performance of some selected major
equity benchmarks since the invasion of Ukraine
Financial market volatility briefly increased
following the invasion of Ukraine
Source: Refinitiv. Source: Refinitiv.
65
70
75
80
85
90
95
100
105
110
Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22
Price index
(100=Sep-2021)
S&P 500 DJStoxx 600
NIKKEI MSCI EM Asia
MSCI EM Europe (ex. Russia)
15
35
55
75
95
115
135
155
Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21 Jan-22 Mar-22
Implied volatility index
United States (VIX) Europe (VSTOXX) Japan (VXJINDX) Oil (OVX) MOVE

7. Investors’ risk aversion caused an increase in credit spreads and
hedging costs against corporate credit risk
Speculative-rated corporate bond spreads widened
following a spike in investors’ risk aversion but they
have moderately narrowed recently amid persisting
concerns about refinancing risk for leveraged
corporates in a higher interest rate environment.
7
Diverging trends between corporate bond spreads
and Credit Default Swaps suggest that investors
hold their investment positions, but CDS help
reduce downside risks particularly for Western
European companies since the onset of the
invasion of Ukraine.
Speculative-rated corporate bond spreads
widened in some selected major markets
Corporate credit default swaps increased in
some selected advanced markets
Note: Option-adjusted spreads derived from derived from ICE BofAM speculative-rated corporate
bond benchmarks.
Source: Refinitiv.
Note: CDS indices derived from Refinitiv sectoral indices.
Source: Refinitiv.
60
80
100
120
140
160
180
200
220
Nov-19 Feb-20 May-20 Aug-20 Nov-20 Feb-21 May-21 Aug-21 Nov-21 Feb-22
Basis points
United States European Union Asia
200
300
400
500
600
700
800
900
Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22
Basis points
Euro High-Yield EMEs corporate High-Yield US High-Yield

8. Spillovers have also affected sovereign credit markets and banks
Russian sovereign rating downgraded to “near-
default” status and rising concerns over the
conflict's impact on economic and fiscal
conditions in some Eastern European economies.
8
Russian banks are experiencing strained
conditions and growing risk of higher non-
performing loans (NPLs), and spillovers to
European banks most exposed to Russia.
Higher sovereign CDS spreads in Russian and
some Central, Eastern and Southeastern
European markets
Lower stock prices of Russian and European
banks with substantial exposures to Russia
Note: 5-year senior credit default swap (CDS) indices.
Source: Refinitiv.
Source: Refinitiv.
0
2000
4000
6000
8000
10000
12000
14000
30
80
130
180
230
Dec-21 Jan-22 Feb-22 Mar-22
Basis points
Basis points
Bulgaria Romania Poland Hungary
Slovakia Serbia Russia (RHS)
38
48
58
68
78
88
98
108
118
128
Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22
Price index
(100=Sep-2021)
Russia Euro Area United Kingdom United States Emerging markets

9. Rising gold price and declining speculative asset prices reflect
reductions of investors’ exposure to higher-risk assets
Simultaneous rises in gold prices and Treasury
inflation protected securities yields reflect
investors’ concerns over the economic outlook
and inflation.
9
The rotation to value stocks and the declining
performance of crypto-assets reflect reductions
of investors’ exposure to higher-risk assets.
Rising gold price and yield of Treasury inflation
linked securities
The rotation to value stocks on selected major
advanced markets and bitcoin performance
Source: Refinitiv, Federal Reserve Bank of St Louis. Source: Refinitiv.
-1.5
-1
-0.5
0
0.5
1
1.5
1000
1100
1200
1300
1400
1500
1600
1700
1800
1900
2000
Jan-10 Jan-12 Jan-14 Jan-16 Jan-18 Jan-20 Jan-22
%
Gold price (USD per
tonne)
Gold price 10Y TIPS yield (RHS)
60
70
80
90
100
110
120
130
140
150
0.9
0.95
1
1.05
1.1
1.15
1.2
Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22
Price index
(100=Sep-2021)
Ratio
Europe United States Bitcoin (RHS)

10. 2. ASSESSMENT OF RISKS AND
TRANSMISSION CHANNELS
10

11. Risks from elevated sovereign debt levels and high refinancing needs,
and potential losses for investors’ amid intensifying geopolitical tensions
Elevated sovereign debt levels and high
refinancing needs could increase refinancing risk
for sovereign issuers, amid rising interest rates
and the possible need for fiscal support to
cushion the impacts of the conflict.
11
Large asset managers and insurers could record
material losses following a default on Russian
sovereign debt, and where other Russian assets
have become unsaleable due to disrupted capital
markets and sanctions.
Fiscal and borrowing outlook in OECD countries Russian central bank reserves not frozen by
sanctions exceed maturing foreign currency
sovereign debt
Source: OECD Sovereign Borrowing Outlook 2021. Note: Geographical distribution of international reserves of the Central Bank of Russia (end
June 2021) and foreign currency sovereign bonds that will mature in 2022-2026.
Source: Refinitiv, OECD calculations.
0
1
2
3
4
5
6
7
8
9
10
0
2
4
6
8
10
12
14
16
18
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021e
Trillion
Trillion
Central government marketable GBR (USD, LHS) General government deficit (USD, RHS)
Central government marketable NBR (USD, RHS)
Gold
China
IFIs
Others
#N/A
France
#N/A
Japan
#N/A
Germany
#N/A
United States
#N/A
#N/A
United Kingdom
#N/A
#N/A
Austria
#N/A
#N/A
Canada
#N/A
0
50
100
150
200
250
300
350
CBR International reserves not
frozen
CBR International reserves frozen Redemptions of foreign currecy
sovereign debt (2022-2026)
USD, bn

12. The Russian invasion of Ukraine contributes to an erosion of credit
market conditions for corporates globally
Corporate defaults could rise in 2022 amid
gradual withdrawal of policy support, geopolitical
instability and trade disruptions, which may
result in losses to financial institutions and
investors exposed to the corporate sector.
12
A number of Russian and European non-
financial corporates have been downgraded due
to risks from their deteriorating business
conditions in Russia and Ukraine and/or higher
energy prices.
Gradual expected increase in default probability
in 2022
Corporate rating downgrades following the
invasion of Ukraine and surge in energy prices
Source: Moody’s. Note: Number of rating downgrades between February 25th and April 12th of 2022.
Source: S&P Global Ratings.
1.7
2.4
10.1
0
2
4
6
8
10
12
14
1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021
Default probability (%)
Speculative grade Baseline scenario Pessimistic scenario Long-term average
0
10
20
30
40
50
60
70
80
Number of rating
downgrades

13. Banks face growing risks of higher NPLs and losses from disrupted
business activities and borrower’s deteriorating credit quality
International banks risk losses and higher NPLs
through direct exposures to Ukraine and Russia,
and from indirect exposures to corporate
borrowers relying on trade with Russia and
Ukraine.
13
Russian banks already stand out globally for the
high share of NPLs and low capital ratios, while
deteriorating credit quality in households and
corporates could lift NPLs higher.
Consolidated positions of international banks on
residents of Russia and Ukraine
Capital and NPLs ratios of banks in selected
banking markets
Source: Bank for International Settlements, OECD calculations. Source: IMF Financial Soundness Indicators database.
Russia
Bulgaria
Romania
Poland
Hungary
Slovakia
Czech Republic
France Italy
Germany
Spain
United Kingdom
United States India
Brazil
South Africa
Mexico
Indonesia
Malaysia
8
10
12
14
16
18
20
22
24
0 2 4 6 8 10
Tier 1 capital (% of
RWA)
Non-performing loans (% of total loans)
0
50
100
150
200
250
300
Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21
USD, bn
Russia - United States Russia - Euro Area Russia - Other European economies
Russia - Other countries Ukraine - United States Ukraine - Euro Area
Ukraine - Other European economies Ukraine - Other countries

14. Elevated commodity prices and supply chain disruptions are raising
debt sustainability concerns in EMEs
Increasing inflation pressures in EMEs net
importers could necessitate further monetary
policy tightening, and also fiscal support to
vulnerable households and corporates.
14
Financial risks are rising for highly indebted
corporates in EMEs, with potential spillovers
from interlinked balance sheets of corporates,
households, banks and sovereigns.
Energy and trade dependency to Russia and
Ukraine
Highly indebted corporate sectors in EMEs
Note: Top 10 EME net importers from Russia or Ukraine. Data as of end-2020.
Source: Eurostat, IMF, World Bank.
Note: Percentage of corporate debt at risk after a simulated 30 percent shock to pre-COVID-
19 crisis earnings in Top 15 selected EMEs.
Source: World Bank.
0 5 10 15
Bulgaria
Azerbaijan
Republic of…
Georgia
Belarus
Uzbekistan
Armenia
Kazakhstan
Tajikistan
Kyrgyz Republic
% of GDP
Net imports from Russia
0 2 4 6
Nepal
Tunisia
North Macedonia
Liberia
Armenia
Lebanon
Sudan
Georgia
Libya
Republic of Moldova
% of GDP
Net imports from Ukraine
0
10
20
30
40
50
60
70
80
90
100 Debt at risk (%)

15. 3. RISKS TO ALTERNATIVE FINANCE
MARKETS
15

16. Emerging risks following the Russian invasion of Ukraine for stablecoin
markets and ESG ratings
Large market capitalization of Stablecoins
increases the risk of disruption to short-term
debt markets, such as commercial paper,
following a sudden shift in investors’ risk
sentiment and mass redemptions.
16
Companies with Russian operations have higher
ESG scores highlighting challenges for
ESG ratings to reflect growing social and
governance risks in Russia arising from the
military conflict, sanctions and deteriorating
political climate.
The surge of stablecoin issuance in 2020-2021 ESG measurement services missed the Russia
Effect
Source: CoinMetrics, OECD calculations. Source: Lev at al. (2022).
0
50
100
150
200
Jul 2020 Jan 2021 Jul 2021 Jan 2022
USD, bn
USDT USDC BUSD DAI USDP HUSD
GUSD sUSD UST LUSD alUSD Others
0
10
20
30
40
50
60
70
80
90
ESG score Social score Human rights score
Average score
European firms with Russian activities European peer firms

17. Financial markets have been resilient, yet vulnerabilities could be
exacerbated by inflation and rising financing costs
17
Sovereign refinancing needs
Corporate debt
sustainability concerns
Risk of higher NPLs and
losses for banks
EME risks are rising
Challenges for stablecoin
markets and ESG ratings
Rising inflation pressures and tightening monetary conditions are raising
refinancing risk in some OECD economies.
Weakening economic prospects and rising refinancing costs are causing
debt sustainability concerns for corporates.
Disrupted business activities and borrower’s deteriorating credit quality
could expose banks to higher NPLs and increased losses.
Elevated commodity prices and supply chain disruptions are driving
debt sustainability concerns for EME corporates, with potential
spillovers to sovereigns, households and banks.
Stablecoins vulnerable to mass redemptions with negative spillovers
to traditional financial markets; Challenges for S and G ratings of
certain assets to capture growing geopolitical and sanction risks.

18. .
Supporting financial markets in the post-COVID 19
environment
Financial markets policy guidance on the OECD Financial markets webpage:
 Financial Markets & Intermediation: surveillance and analysis of markets and
intermediation to assess frameworks and policies effectively contributing to economic growth
 FinTech & Digitalisation of Finance: how the adoption of innovative technologies in
finance can contribute to economic growth
 Sustainable Finance: essential to the long-term value that underpins inclusive growth
 Public debt management – increased borrowing needs and market volatility
Link to Recent OECD publications:
 OECD Economic Outlook, Interim Report March 2022
 The rise of non-bank financial intermediation in real estate
 Why Decentralised Finance (DeFi) Matters and the Policy Implications
 Financial Markets and Climate Transition: Opportunities, Challenges and Policy Implications
 ESG Investing and Climate Transition: Market Practices, Issues and Policy Considerations