IMF: more work for global financial stability
Print Edition
WORLD financial markets have calmed after turmoil earlier this year, but more needs to be done to ensure global financial stability amid slowing growth and weak commodity prices, the International Monetary Fund warned yesterday.
The IMF said in its latest Global Financial Stability Report that financial system risks have risen since the last report in October and market turmoil could easily recur and intensify if no action is taken to clean up bank balance sheets, particularly in China and Europe.
“If the growth and inflation outlook degrade further, the risk of a loss of confidence would rise. In such circumstances, recurrent bouts of financial volatility could interact with balance sheet vulnerabilities,” the IMF said in the report.
“Risk premiums could rise and financial conditions could tighten, creating a pernicious feedback loop of weak growth, low inflation and rising debt burdens,” it added.
The IMF said China’s struggling state enterprise sector is straining bank balance sheets. The report said that bank loans to companies potentially at risk in China could translate into potential bank losses of approximately 7 percent of the country’s gross domestic product.
“This may seem like a large number, but it is manageable given China’s bank and policy buffers and continued strong growth in the economy,” said Jose Vinals, head of the IMF’s Monetary and Capital Markets Department.
The report complements the IMF’s gloomy World Economic Outlook publication released on Tuesday, in which the crisis lending institution cut its growth forecasts for the fourth time in the past year.
The report comes as finance ministers and central bankers from around the world convene in Washington this week for the spring meetings of the IMF, the World Bank and Group of 20 finance ministers and central bank governors. The formal meetings begin tomorrow and continue through Sunday.
The IMF stability report said negative interest rate policies, along with bond purchases, were “crucial” to boosting economic growth.
Although they have cut bank profit margins, the report said banks would ultimately benefit from stronger growth and the ability to cut non-deposit funding costs.
However, should the IMF’s worst-case market disruption scenario occur, its modeling suggests that potential global output growth could be reduced by 3.7 percentage points over five years — effectively the loss of nearly a year’s worth of growth at current levels.
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
