The International Monetary Fund (IMF) said it was too early to declare that all risks to the turmoil that had rocked the global financial system had passed, and bank failures were likely to weigh on economic growth. Indicated.
A strong policy response to a string of bank failures has eased investor fears, but fragility and tensions remain in financial markets, the IMF said on Thursday, in a semi-annual financial stability report. analyzed in the report.
“The resilience of the global financial system has been severely tested. It remains to be seen whether the measures taken so far will be sufficient to fully restore confidence in markets and financial institutions,” the report said. .
In the U.S., authorities took the unusual step of protecting all deposits at failed Silicon Valley Bank (SVB) and signature banks to prevent the crisis from escalating. In addition, the US Federal Reserve Board (FRB) has created a new facility to inject additional liquidity into the financial system.Swiss authorities were in dangerTo rescue the Credit Suisse GroupBrokered and supported the acquisition by the UBS Group.
In a blog post accompanying the report, Tobias Adrian, head of the IMF’s financial and capital markets department, said investors may be overestimating risks to the outlook, citing high valuations in U.S. stocks in particular.
Tobias Adrian, Director, Monetary and Capital Markets Department, IMF
Photographer: Ben Kilb/Bloomberg
“Perhaps surprisingly, overall financial conditions have not tightened significantly since the bank failure,” he wrote.
Bank failures represent a “dangerous combination of vulnerabilities that have been lurking in the global financial system for years,” and those risks are now pushing central banks to take aggressive steps to combat inflation at its highest level in decades. The IMF argued that the tightening of credit exposed it.
“Rapid policy tightening is fundamentally changing the world of financial risk. Asset allocations, asset prices and market conditions are adapting to new conditions, posing challenges to market structures, investors and financial institutions. There is,” he analyzed.
Tensions in the financial sector are also complicating central banks’ efforts to contain inflation, which is more durable than expected, the IMF said. If those stresses worsen, officials may have to juggle a difficult balance between fighting inflation and ensuring the stability of the financial system, he said.
swift action
“Policymakers should act quickly to prevent systemic events that could undermine investor confidence in the global financial system,” the IMF said in its report.
But he added that the decision to push inflation down should be made as soon as possible once financial stresses have abated.
Adrian wrote on his blog that the recent turmoil resembled the Savings and Loan crisis of the 1980s more than the global financial crisis of about 15 years ago. He noted that the banking system’s capital levels were much higher than they were in 2008 and that post-crisis regulation reduced credit risk.
Still, “stress in the banking sector is likely to adversely affect broader lending conditions and, in turn, economic growth,” the IMF said. The recent big sell-off in bank stocks has squeezed credit and could cut growth in the U.S. and eurozone by about half a percentage point, it said.
The weaknesses of the system that the IMF pointed out in its Financial Stability Report are:
- Approximately 9% of U.S. banks with assets of $10-300 billion (approximately ¥1.3 trillion-¥39.9 trillion) are de facto capital when all unrealized losses on Treasury and other bond holdings are taken into account. fall short
- commercial real estate marketis grossly overpriced in many countries, putting banks and other lenders at risk of further tightening credit following the recent turmoil. This could trigger a vicious cycle between credit growth and asset prices.Falling asset prices reduce the value of collateral pledged when borrowing.
- The European Central Bank (ECB) may need to pump additional liquidity into the financial system when its conditional long-term refinancing operations (TLTROs) come due in June.Banks in some Southern European countries may not have surplus funds to repay
But the IMF also pointed to a bright spot, noting that “so far, the emerging market powers have weathered the rapid monetary tightening in advanced economies relatively unscathed.”
Original title: IMF Warns It’s Too Soon to Sound All-Clear on Financial Turmoil (excerpt)
