willing or able to provide adequate financial support. The results confirm that, despite strong recapitalization efforts, it will take time to clean-up banks’ balance sheets.
11. Marketliquidityrisks appear to have declined for the financial system as a while, although financial firms remain vulnerable to funding rollover risk . With the infusion of short-term liquidity to the markets, financial institutions were able to improve their liquidity buffers but at the cost of shortening their funding maturity profiles. Financial firms will need to address rollover risks
International Monetary Fund. Monetary and Capital Markets Department
Financial Stability Overview
Developments over the past six months have increased global financial stability risks. Risks have also rotated from advanced economies to emerging markets, from banks to shadow banks, and from solvency to marketliquidityrisks. The global financial system is being buffeted by a series of changes in financial markets, reflecting diverging growth patterns and monetary policies as global growth prospects have weakened. Disinflationary forces have strengthened as oil and commodity prices have dropped. Although the latter has
Ron Anderson, Jon Danielsson, Chikako Baba, Mr. Udaibir S Das, Mr. Heedon Kang, and Miguel A. Segoviano
could lead to an under-estimation of risks. However, there remain areas for enhancement for a more comprehensive feedback channel, for instance (1) incorporation of interaction of marketliquidityrisk and bank portfolio redistribution; (2) incorporation of interbank spillover arising from bank losses; and (3) incorporation of the constraint on banks’ CA ratios and its impact on lending rate and loan growth.
( Hong Kong Monetary Authority, 2016 )
The present financial crisis is testing the resilience of the global financial system as well as the robustness of national and multilateral policy frameworks. As requested by Executive Directors, this paper reviews recent progress in meeting these challenges, focusing on the role of the Fund and its collaboration with the Financial Stability Forum (FSF). In concert with other international bodies, the Fund has sought to promote appropriate policy responses to the financial turmoil, including through its report on The Recent Financial Turmoil—Initial Assessment, Policy Lessons, and Implications for Fund Surveillance, in the Global Financial Stability Report (GFSR) and the World Economic Outlook (WEO), as well as in recent Article IV consultations and Financial Sector Assessment Programs (FSAPs). The Fund has also responded to the International Monetary and Financial Committee’s (IMFC) call for closer collaboration with other international fora, including by supporting the implementation of policy lessons from the crisis, such as the 67 FSF recommendations issued in April 2008.