The latest surge in global share prices and other assets has left markets susceptible to a crash given the current uncertain economic and geopolitical backdrop, the G20's risk watchdog said on Monday.
Financial Stability Board (FSB) Chair Andrew Bailey told G20 ministers in a letter the elevated risks made maintaining multilateral cooperation crucial – not just to prevent crises, but also to support sustainable economic growth.
"While most jurisdictions have seen a rebound in financial markets in recent months, valuations could now be at odds with the uncertain economic and geopolitical outlook, leaving markets susceptible to a disorderly adjustment," the letter dated October 8 and published ahead of G20 meetings in Washington this week said.
That warning came just days before US President Donald Trump's threat of "massive" new tariffs on China in retaliation for Beijing tightening rare earth restrictions triggered Wall Street's biggest fall in nearly six months.
Bailey also pointed to the ongoing rise in sovereign debt levels, adding that vulnerabilities in the financial system remain high. "The need for global standards and cooperation, therefore, remains abundantly clear," the letter said.
In response to the elevated risks, the FSB, which groups central banks and financial regulators from the Group of 20 economies, will "pivot" its focus, Bailey said.
It will shift it from policy development to monitoring and facilitating the implementation of agreed global financial reforms, which have not been completely achieved.
"The effectiveness of these measures depends on their timely, consistent and comprehensive implementation across all jurisdictions," Bailey said.
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