Near-term global financial stability risks have been contained as unprecedented and timely policy response to the coronavirus (COVID-19) pandemic has helped avert a financial meltdown and maintain the flow of credit to the economy. But the outlook remains highly uncertain, and vulnerabilities are rising, representing potential headwinds to recovery. Vulnerabilities have increased in the nonfinancial corporate sector as firms have taken on more debt to cope with cash shortages and in the sovereign sector as fiscal deficits have widened to support the economy. As the crisis unfolds, corporate liquidity pressures may morph into insolvencies, especially if the recovery is delayed. Small and medium-sized enterprises (SMEs) are more vulnerable than large firms with access to capital markets. Although the global banking system is well capitalized, some banking systems may experience capital shortfalls in an adverse scenario, even with the currently deployed policy measures. Nonbank financial institutions have managed to withstand the market turmoil thanks to swift policy interventions, but fragilities remain, and the damage could be more extensive in a more prolonged period of market stress. Some emerging and frontier market economies already face financing challenges, which may lead to rising debt distress or financial instability. Looking ahead, it is imperative that policy support is maintained for the recovery to take hold. As economies reopen, accommodative monetary and financial conditions, credit availability, and targeted solvency support will be essential to sustaining the recovery.