The Financial Stability Board, the global financial watchdog, has warned of "further challenges and shocks" emanating from the impact of higher interest rates on countries' economies and the property sector.

According to a report by the FT, Klaas Knot, chair of the FSB, told G20 leaders the global economic recovery is "losing momentum", and the effects of the rise in interest rates in major economies are "increasingly being felt".

"There will certainly be further challenges and shocks facing the global financial system in the months and years to come," he said.

Knot also pointed to the property sector as a potential lurking problem, and one authorities should "closely monitor" for risks.

Financial providers to the real estate sector, which is particularly vulnerable to increases to the cost of borrowing through higher interest rates, must "manage their risks properly", he said.

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Fixed rate loans and mortgages meant the recent increases in interest rates by the US Federal Reserve, European Central Bank and Bank of England will often not hit borrowers straight away. This slow release will only impact each country's real economy after a period of time.

The FSB chair said current risks in the global financial system highlighted the urgency to put in place worldwide rules for bank capital, which are due to be implemented this year. He also said that tighter regulation of non-bank financial institutions (NBFIs), such as private credit, hedge funds and insurers, is also needed.

It is "critical" to put in place agreed reforms to address risks in those markets, Knot added, including provisions around money market funds, open-ended funds, margins, leverage and bond market liquidity.

Delays to countries adopting the rules include the US, which announced in July it would not implement the bank capital regime until mid-2025. This would be six months after the EU and UK, which have both already announced delays to give banks more time to adjust to the new regime.

In July, the FSB launched a consultation on policies to address vulnerabilities from liquidity mismatch in open-ended funds, while the Board of the International Organization of Securities Commissions (IOSCO) issued a consultation on anti-dilution liquidity management tools.

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The UK's Investment Association said it welcomed "the recognition by IOSCO and the FSB of the central role of the fund manager in determining how to deploy [liquidity management] tools (LMTs)".

An obligation to monitor and mitigate material dilution "provides a way to widen the use of anti-dilution LMTs, without an overly prescriptive and inflexible framework, which will help protect investors", the association added. However, it encouraged the FSB to reconsider its "bucketing approach".

This concentrates exclusively on the presumed liquidity of underlying assets, rather than a holistic approach when assessing the liquidity profile of different strategies, which the IA said will "not provide the robust framework we all seek".