Bank of England Governor Mervyn King has attacked the 'absurd' level of risk taken on by banks in a speech.
He called the banks' reliance on short-term debt to meet funding needs in 2008 an "accident waiting to happen".
He said that, in future, banks must be forced to rely much more on equity to finance their risky activities.
His comments raise the prospect that big UK banks will be required to hold significantly more equity than new international rules require.
In order to do this, the banks might have to issue new shares, pay out less profits as dividends, or ration new lending more tightly.
Tighter rules
In September, the Basel international committee of bank regulators raised the minimum ratio of equity that banks must hold to absorb losses on loans and other risky investments from 2% to 7% of assets.
However, the committee said that even higher ratios were still to be agreed for the biggest banks whose failure would pose a risk to the financial system.
And individual regulators - such as the Bank of England - are free to set even higher standards if they choose.
The Swiss announced much higher capital ratios for their two biggest banks earlier this month.
'Achilles heel'
Mr King said that the new Basel minimum capital ratios were inadequate to address the problem of banks that are too big too fail, such as Barclays, HSBC and RBS.
Such banks, he said, enjoy an implicit guarantee, which gives them an incentive to take on excessive risks.
He also said that the coalition government's proposal for a bank levy - which is expected to raise £2.5bn a year - would be nowhere near enough to cover the losses of a future financial crisis.
"The balance sheets of too many banks were an accident waiting to happen," he said, referring to the 2008 financial crisis.
"For all the clever innovation in the financial system, its Achilles heel was, and remains, simply the extraordinary - indeed absurd - levels of leverage represented by a heavy reliance on short-term debt," said Mr King.
"The broad answer to the problem is likely to be remarkably simple. Banks should be financed much more heavily by equity rather than short-term debt. Much, much more equity. Much, much less short-term debt."
He claimed a future crisis could only be averted by requiring capital levels that would "be seen by the industry as wildly excessive most of the time".
He expressed scepticism about the idea that banks could calibrate their borrowings depending on the riskiness of their investments.
"If only banks were playing in a casino, then we probably could calculate appropriate risk weights," he said. "Unfortunately, the world is more complicated."
Mr King gave his speech at the Buttonwood Gathering - a conference of economists in New York arranged by the Economist magazine.
Source: www.bbc.co.uk
Tuesday, October 26, 2010
UK economy grows a faster-than-expected 0.8%
The UK's economy grew at 0.8% between July and September, official figures show, suggesting the economy is recovering faster than expected.
It follows 1.2% growth in the second quarter of the year, and is double the 0.4% expected by analysts.
Meanwhile rating agency Standard and Poor's upgraded its outlook for the UK's triple-A credit rating.
Chancellor George Osborne called both reports "a vote of confidence in the new government's economic policies".
The gross domestic product (GDP) figure released by the Office for National Statistics (ONS) is only a first estimate, and may be revised.
Analysts had expected a slowdown after weak retail sales and housing data.
Government relief
"This is the second major GDP growth surprise in a row and suggests that the UK economy is more resilient than many had feared," said James Knightley, economist at ING.
"The government will no doubt take this as a sign that the private sector can fill the gap created by public sector cuts, but with consumer confidence, hiring intentions surveys and housing activity data all softening we remain cautious."
But Chancellor George Osborne said that, along with the government's Spending Review announced last week, the ONS data should help underpin confidence in the UK economy.
"The ONS believe that the underlying growth in the third quarter was 'broadly similar' to the strong second quarter," he said.
"This gives me confidence that although global economic conditions remain choppy, a steady recovery is underway."
However, shadow chancellor Alan Johnson claimed the data showed no such thing.
"There's no sign yet of the kind of momentum in the private sector that we need to actually create the 2.5 million jobs that the [Office of Budget Responsibility] is suggesting are necessary, to actually come out of this with increases in employment," he said.
But the government's planned cuts in its Spending Review got a stamp of approval from ratings agency Standard & Poor's, which raised its outlook for the UK's triple-A rating back to "stable" from "negative".
"In our opinion, the decisions reached by the United Kingdom coalition government in its 2010 Spending Review reduce risks to the government's implementation of its June 2010 fiscal consolidation programme," the company said in a statement.
Building momentum?
The construction sector continued to grow strongly at 4%, the data release from the ONS showed, although this was slower than the 9.5% recorded in the previous three months.
The building industry has been dealing with a backlog of work that had been postponed from the beginning of the year due to bad weather.
"It's basically all down to construction again and I think the implication is that that's not sustainable," said James Nixon, economist at Societe Generale.
"The underlying rate is obviously significantly less than these headline numbers would suggest."
The recovering construction industry contributed almost a third of the total GDP growth for the quarter.
However, the latest data suggests that the recovery may be becoming slightly broader-based.
Manufacturing slowed to 0.6% from 1.0% the previous quarter, but was still ahead of predictions.
Service industries also held steady at 0.6% growth, with the transport, storage and communications sub-sector returning to growth.
The pound jumped following the news, which lowered expectations that the Bank of England will engage in further quantitative easing in the near future.
The pound rose one cent against the dollar, to $1.585, immediately following the data release.
"Today's data ought to dispel any notion that the Bank of England will implement more quantitative easing in the near term," said Hetal Mehta, analyst at Daiwa Capital Markets.
Slowdown fears
Some economists had feared the UK economy was stalling on the back of spending cut threats.
"The timing of the VAT rise in the new year will help to bolster spending over the fourth quarter, but this is also likely to slow growth more noticeably through the winter and early next year," predicted Ian McCafferty, chief economic adviser to the CBI business group.
Recent surveys have suggested that confidence in the manufacturing and services sectors has dropped due to concerns surrounding the impact of the spending cuts.
Weaker-than-expected retail sales in September added to the concerns, with sales slipping 0.2%.
Meanwhile, the housing market has also started to suffer. Figures released by the British Bankers' Association on Monday showed that the downward trend in the number of mortgage approvals for house purchases had continued in September.
Source: www.bbc.co.uk
It follows 1.2% growth in the second quarter of the year, and is double the 0.4% expected by analysts.
Meanwhile rating agency Standard and Poor's upgraded its outlook for the UK's triple-A credit rating.
Chancellor George Osborne called both reports "a vote of confidence in the new government's economic policies".
The gross domestic product (GDP) figure released by the Office for National Statistics (ONS) is only a first estimate, and may be revised.
Analysts had expected a slowdown after weak retail sales and housing data.
Government relief
"This is the second major GDP growth surprise in a row and suggests that the UK economy is more resilient than many had feared," said James Knightley, economist at ING.
"The government will no doubt take this as a sign that the private sector can fill the gap created by public sector cuts, but with consumer confidence, hiring intentions surveys and housing activity data all softening we remain cautious."
But Chancellor George Osborne said that, along with the government's Spending Review announced last week, the ONS data should help underpin confidence in the UK economy.
"The ONS believe that the underlying growth in the third quarter was 'broadly similar' to the strong second quarter," he said.
"This gives me confidence that although global economic conditions remain choppy, a steady recovery is underway."
However, shadow chancellor Alan Johnson claimed the data showed no such thing.
"There's no sign yet of the kind of momentum in the private sector that we need to actually create the 2.5 million jobs that the [Office of Budget Responsibility] is suggesting are necessary, to actually come out of this with increases in employment," he said.
But the government's planned cuts in its Spending Review got a stamp of approval from ratings agency Standard & Poor's, which raised its outlook for the UK's triple-A rating back to "stable" from "negative".
"In our opinion, the decisions reached by the United Kingdom coalition government in its 2010 Spending Review reduce risks to the government's implementation of its June 2010 fiscal consolidation programme," the company said in a statement.
Building momentum?
The construction sector continued to grow strongly at 4%, the data release from the ONS showed, although this was slower than the 9.5% recorded in the previous three months.
The building industry has been dealing with a backlog of work that had been postponed from the beginning of the year due to bad weather.
"It's basically all down to construction again and I think the implication is that that's not sustainable," said James Nixon, economist at Societe Generale.
"The underlying rate is obviously significantly less than these headline numbers would suggest."
The recovering construction industry contributed almost a third of the total GDP growth for the quarter.
However, the latest data suggests that the recovery may be becoming slightly broader-based.
Manufacturing slowed to 0.6% from 1.0% the previous quarter, but was still ahead of predictions.
Service industries also held steady at 0.6% growth, with the transport, storage and communications sub-sector returning to growth.
The pound jumped following the news, which lowered expectations that the Bank of England will engage in further quantitative easing in the near future.
The pound rose one cent against the dollar, to $1.585, immediately following the data release.
"Today's data ought to dispel any notion that the Bank of England will implement more quantitative easing in the near term," said Hetal Mehta, analyst at Daiwa Capital Markets.
Slowdown fears
Some economists had feared the UK economy was stalling on the back of spending cut threats.
"The timing of the VAT rise in the new year will help to bolster spending over the fourth quarter, but this is also likely to slow growth more noticeably through the winter and early next year," predicted Ian McCafferty, chief economic adviser to the CBI business group.
Recent surveys have suggested that confidence in the manufacturing and services sectors has dropped due to concerns surrounding the impact of the spending cuts.
Weaker-than-expected retail sales in September added to the concerns, with sales slipping 0.2%.
Meanwhile, the housing market has also started to suffer. Figures released by the British Bankers' Association on Monday showed that the downward trend in the number of mortgage approvals for house purchases had continued in September.
Source: www.bbc.co.uk
Friday, October 15, 2010
Financial Regulatory Reforms to be Discussed at FSB Seoul Plenary
A plenary session of the Financial Stability Board, or FSB, will be held in Seoul next Wednesday to discuss financial regulatory reforms ahead of next month's G20 Seoul Summit.
Key agenda items on the table include strengthening supervision of global SIFI's or Systemically Important Financial Institutions and enhancing bank capital regulation.
The delegates will also discuss the establishment of an outreach program to encourage non-member countries to participate in the FSB.
The results of the meeting will then be reported to the G20 leaders at the Seoul summit, where the issues are expected to be resolved.
Key agenda items on the table include strengthening supervision of global SIFI's or Systemically Important Financial Institutions and enhancing bank capital regulation.
The delegates will also discuss the establishment of an outreach program to encourage non-member countries to participate in the FSB.
The results of the meeting will then be reported to the G20 leaders at the Seoul summit, where the issues are expected to be resolved.
Thursday, October 07, 2010
Financial Stability Set Back by Debt Woes: IMF
WASHINGTON (Reuters) - Sovereign debt risk in Europe and continued real estate woes in the United States have dealt a setback to global financial stability in the past six months, the International Monetary Fund said on Tuesday.
The IMF said risks to the financial sector could be reduced if legacy problem assets were cleaned up, if governments improved their fiscal positions and if more clarity were provided on global financial regulation.
"The global financial system is still in a period of significant uncertainty and remains the Achilles' heel of the economic recovery," the IMF said in its semi-annual Global Financial Stability Report.
"The recent turmoil in sovereign debt markets in Europe highlighted increased vulnerabilities of bank and sovereign balance sheets arising from the crisis," the fund said.
Jose Vinals, director of the IMF's Monetary and Capital Markets Department, said recent volatility in currency markets was not a major concern for global financial stability as long as the changes "move in the direction of medium-term fundamentals.
"The best way of protecting against any unintended consequences of foreign exchange rate changes on financial balance sheets is to have sound buffers to accommodate whatever changes happen," he added.
The IMF said it trimmed its estimate of total global bank write-downs related to the financial crisis between 2007 and 2010 to $2.2 trillion from its April estimate of $2.3 trillion, largely on a drop in securities losses. Banks have recognized more than three-quarters of these write-offs, leaving about $550 billion still to be taken.
However, the fund said banks had made less progress in dealing with near-term funding pressures -- nearly $4 trillion of bank debt needs to be refinanced in the next 24 months.
"Overall, bank balance sheets need to be further bolstered to ensure financial stability against funding shocks and to prevent adverse feedback loops with the real economy," the IMF said.
The forceful policy response to the European debt crisis in April and May of this year helped to offset market and liquidity risks to banks. But the sector's stability in the region remains vulnerable to potential market shocks, the IMF said.
U.S. REAL ESTATE WEIGHS
In the United States, concerns about household balance sheets and real estate markets amid persistently high unemployment are clouding the outlook for loan quality and bank capital needs.
"Although manageable from a financial stability perspective, a double dip in real estate could have a long lasting impact on the economic recovery," the IMF said.
U.S. banks have had to raise modest amounts of capital, but this largely reflects the shifting of much of the mortgage risks and losses onto Fannie Mae and Freddie Mac, the IMF said. Capital challenges for these government-controlled entities could reactivate a negative global feedback loop between the financial system and the economy.
The fund said it conducted its own "stress test" on the top 40 U.S. banking companies and found that in an adverse scenario where real estate prices fell significantly, these banks would require $13 billion in additional capital to maintain a 4 percent Tier 1 common capital ratio.
"Mid-size banks are particularly vulnerable because it may be more difficult for them to raise capital," the IMF said.
Vinals said the IMF was not immediately concerned with the risk of asset bubbles in emerging market economies but acknowledged there were "hot spots" that needed monitoring.
Brazil said on Tuesday it would increase its tax on foreign bond purchases to curb a rapid rise in its currency and to protect exporters amid a surge of private capital into the country.
Vinals said the earlier tax imposed by Brazil on equity investments to slow the flow of capital had diverted investments from stocks into bonds but did little to tackle the overall flows.
"I think the jury is still out. We just have to see what happens to assess the effectiveness of these new measures," he added.
(Additional reporting by Lesley Wroughton and Emily Kaiser in Washington; Editing by Neil Stempleman and Padraic Cassidy)
By David Lawder
Source: ABS News
www.abcnews.go.com
The IMF said risks to the financial sector could be reduced if legacy problem assets were cleaned up, if governments improved their fiscal positions and if more clarity were provided on global financial regulation.
"The global financial system is still in a period of significant uncertainty and remains the Achilles' heel of the economic recovery," the IMF said in its semi-annual Global Financial Stability Report.
"The recent turmoil in sovereign debt markets in Europe highlighted increased vulnerabilities of bank and sovereign balance sheets arising from the crisis," the fund said.
Jose Vinals, director of the IMF's Monetary and Capital Markets Department, said recent volatility in currency markets was not a major concern for global financial stability as long as the changes "move in the direction of medium-term fundamentals.
"The best way of protecting against any unintended consequences of foreign exchange rate changes on financial balance sheets is to have sound buffers to accommodate whatever changes happen," he added.
The IMF said it trimmed its estimate of total global bank write-downs related to the financial crisis between 2007 and 2010 to $2.2 trillion from its April estimate of $2.3 trillion, largely on a drop in securities losses. Banks have recognized more than three-quarters of these write-offs, leaving about $550 billion still to be taken.
However, the fund said banks had made less progress in dealing with near-term funding pressures -- nearly $4 trillion of bank debt needs to be refinanced in the next 24 months.
"Overall, bank balance sheets need to be further bolstered to ensure financial stability against funding shocks and to prevent adverse feedback loops with the real economy," the IMF said.
The forceful policy response to the European debt crisis in April and May of this year helped to offset market and liquidity risks to banks. But the sector's stability in the region remains vulnerable to potential market shocks, the IMF said.
U.S. REAL ESTATE WEIGHS
In the United States, concerns about household balance sheets and real estate markets amid persistently high unemployment are clouding the outlook for loan quality and bank capital needs.
"Although manageable from a financial stability perspective, a double dip in real estate could have a long lasting impact on the economic recovery," the IMF said.
U.S. banks have had to raise modest amounts of capital, but this largely reflects the shifting of much of the mortgage risks and losses onto Fannie Mae and Freddie Mac, the IMF said. Capital challenges for these government-controlled entities could reactivate a negative global feedback loop between the financial system and the economy.
The fund said it conducted its own "stress test" on the top 40 U.S. banking companies and found that in an adverse scenario where real estate prices fell significantly, these banks would require $13 billion in additional capital to maintain a 4 percent Tier 1 common capital ratio.
"Mid-size banks are particularly vulnerable because it may be more difficult for them to raise capital," the IMF said.
Vinals said the IMF was not immediately concerned with the risk of asset bubbles in emerging market economies but acknowledged there were "hot spots" that needed monitoring.
Brazil said on Tuesday it would increase its tax on foreign bond purchases to curb a rapid rise in its currency and to protect exporters amid a surge of private capital into the country.
Vinals said the earlier tax imposed by Brazil on equity investments to slow the flow of capital had diverted investments from stocks into bonds but did little to tackle the overall flows.
"I think the jury is still out. We just have to see what happens to assess the effectiveness of these new measures," he added.
(Additional reporting by Lesley Wroughton and Emily Kaiser in Washington; Editing by Neil Stempleman and Padraic Cassidy)
By David Lawder
Source: ABS News
www.abcnews.go.com
Wednesday, October 06, 2010
Global Financial Stability Report
A Report by the Monetary and Capital Markets Department on Market Developments and Issues
October 2010: The global financial system is still in a period of significant uncertainty and remains the Achilles' heel of the economic recovery. Although the ongoing recovery is expected to result in a gradual strengthening of balance sheets, progress toward financial stability has experienced a setback since the April 2010 GFSR. The current report highlights how risks have changed over the last six months, traces the sources and channels of financial distress with an emphasis on sovereign risk, and provides a discussion of policy proposals under consideration to mend the global financial system.
April 2010: Risks to global financial stability have eased as the economic recovery has gained steam. But policies are needed to reduce sovereign vulnerabilities, ensure a smooth deleveraging process, and complete the regulatory agenda. The report examines systemic risk and the redesign of financial regulation; the role of central counterparties in making over-the-counter derivatives safer; and the effects of the expansion of global liquidity on receiving economies.
October 2009: This GFSR chronicles the evolution of the path toward reestablishing sound credit intermediation and the near-term risks that could interrupt its restoration, including the rising burden of sovereign financing. The report addresses how to restart securitization markets and the pitfalls if done improperly. The effectiveness of unconventional public sector interventions and the principles for disengagement are discussed. The report also discusses the design of medium-term policies that aim to reshape the financial system to make it more resilient and stable.
April 2009: The global financial system remains under severe stress as the crisis broadens to include households, corporations, and the banking sectors in both advanced and emerging market countries. In normal times, the Global Financial Stability Report aims to prevent crises by highlighting policies that may mitigate systemic risks, thereby contributing to financial stability and sustained economic growth. In the current crisis, the report traces the sources and channels of financial distress and provides policy advice on mitigating its effects on economic activity, stemming contagion, and mending the global financial system.
October 2008: With financial markets worldwide facing growing turmoil, internationally coherent and decisive policy measures will be required to restore confidence in the global financial system. The process of restoring an orderly system will be challenging, as a significant deleveraging is both necessary and inevitable. It is against this challenging and still evolving backdrop that the October 2008 Global Financial Stability Report frames recent events to suggest potential policy measures that could help address the current circumstances.
April 2008: The events of the past six months have demonstrated the fragility of the global financial system and raised fundamental questions about the effectiveness of the response by private and public sector institutions. The report assesses the vulnerabilities that the system is facing and offers tentative conclusions and policy lessons. The report reflects information available up to March 21, 2008.
September 2007: Since the April 2007 Global Financial Stability Report (GFSR), global financial stability has endured an important test. Credit and market risks have risen and markets have become more volatile. Markets are recognizing the extent to which credit discipline has deteriorated in recent years — most notably in the U.S. nonprime mortgage and leveraged loan markets, but also in other related credit markets.
April 2007: This particular issue draws, in part, on a series of discussions with commercial and investment banks, securities firms, asset management companies, hedge funds, insurance companies, pension funds, stock and futures exchanges, credit rating agencies, and academic researchers, as well as regulatory and other public authorities in major financial centers and countries. Contributions from Craig Martin and Kevin Roth (Association for Financial Professionals) in the conducting of a survey are gratefully acknowledged. The report reflects information available up to February 6, 2007.
September 2006: This particular issue draws, in part, on a series of discussions with commercial and investment banks, securities firms, asset management companies, hedge funds, insurance companies, pension funds, stock and futures exchanges, credit rating agencies, and academic researchers, as well as regulatory and other public authorities in major financial centers and countries. The report reflects information available up to July 14, 2006.
April 2006: This particular issue draws, in part, on a series of informal discussions with commercial and investment banks, securities firms, asset management companies, hedge funds, insurance companies, pension funds, stock and futures exchanges, and credit rating agencies, as well as regulatory authorities and academic researchers in many major financial centers and countries. The report reflects information available up to February 10, 2006
September 2005: This particular issue draws, in part, on a series of informal discussions with commercial and investment banks, securities firms, asset management companies, hedge funds, insurance companies, pension funds, stock and futures exchanges, and credit rating agencies, as well as regulatory authorities and academic researchers in many financial centers and countries. The report reflects information available up to July 22, 2005.
April 2005: This particular issue draws, in part, on a series of informal discussions with commercial and investment banks, securities firms, asset management companies, hedge funds, insurance companies, pension funds, stock and futures exchanges, and credit rating agencies, as well as regulatory authorities and academic researchers in many financial centers and countries. The report reflects information available up to February 16, 2005.
September 2004: This issue draws, in part, on a series of informal discussions with commercial and investment banks, securities firms, asset management companies, hedge funds, insurance companies, pension funds, stock and futures exchanges, and credit rating agencies in Canada, Colombia, France, Germany, Hong Kong SAR, Italy, Japan, Mexico, the Netherlands, Poland, Singapore, Switzerland, the United Kingdom, and the United States. The report reflects information available up to July 30, 2004
April 2004: This issue draws, in part, on a series of informal discussions with commercial and investment banks, securities firms, asset management companies, insurance companies, pension funds, stock and futures exchanges, and credit rating agencies in Brazil, Chile, China, Colombia, France, Germany, Hong Kong SAR, Hungary, Japan, Korea, Mexico, Poland, Russia, Singapore, South Africa, Thailand, the United Kingdom, and the United States. The report reflects mostly information available up to March 8, 2004
September 2003: This issue draws, in part, on a series of informal discussions with commercial and investment banks, securities firms, asset management companies, insurance companies, pension funds, stock and futures exchanges, and credit rating agencies in Brazil, Chile, China, Hong Kong SAR, Hungary, Poland, Russia, Singapore, South Africa, and Thailand, as well as the major financial centers. The report reflects mostly information available up to August 4.
March 2003: This issue of the Global Financial Stability Report marks the beginning of a new semiannual frequency for the publication. This issue draws, in part, on a series of informal discussions with commercial and investment banks, securities firms, asset management companies, insurance companies, pension funds, stock and futures exchanges, and credit rating agencies in Brazil, Chile, China, Hong Kong SAR, Hungary, Japan, Poland, Russia, Singapore, Thailand, the United Kingdom, and the United States. The report reflects mostly information available up to February 28, 2003.
December 2002: This is the fourth issue of the Global Financial Stability Report, a quarterly publication launched in March 2002 to provide a regular assessment of global financial markets and to identify potential systemic weaknesses that could lead to crises. This report reflects mostly information available up to November 4, 2002.
June 2002: This is the second issue of the Global Financial Stability Report. This particular issue draws, in part, on a series of informal discussions with commerical investment banks, securities firms, asset management companies, insurance companies, pension funds, stock and futures exchanges, and credit rating agencies in China, Germany, Hong Kong SAR, Hungary, Italy, Japan, Poland, Singapore, Switzerland, Thailand, the United Kingdom, and the United States. The report reflects mostly information available up to May 10, 2002.
September 2002: This is the third issue of the Global Financial Stability Report, a quarterly publication launched in March 2002 to provide a regular assessment of global financial markets and to identify potential systemic weaknesses that could lead to crises. By calling attention to potential fault lines in the global financial system, the report seeks to play a role in preventing crises before they erupt, thereby contributing to global financial stability and to the prospertity of the IMF's member countries.
March 2002: Reviews recent developments in global financial markets and explores the potential market impact of financial imbalances and continued credit quality deterioration. It also focuses on the expansion of credit risk transfer mechanisms -- such as credit derivatives and collateralized debt obligations -- as a means for distributing credit risks. The report concludes with two essays: one on Early Warning System models and another on alternative funding instruments for emerging market countries.
Source: International Monitary Fund
www.imf.org
October 2010: The global financial system is still in a period of significant uncertainty and remains the Achilles' heel of the economic recovery. Although the ongoing recovery is expected to result in a gradual strengthening of balance sheets, progress toward financial stability has experienced a setback since the April 2010 GFSR. The current report highlights how risks have changed over the last six months, traces the sources and channels of financial distress with an emphasis on sovereign risk, and provides a discussion of policy proposals under consideration to mend the global financial system.
April 2010: Risks to global financial stability have eased as the economic recovery has gained steam. But policies are needed to reduce sovereign vulnerabilities, ensure a smooth deleveraging process, and complete the regulatory agenda. The report examines systemic risk and the redesign of financial regulation; the role of central counterparties in making over-the-counter derivatives safer; and the effects of the expansion of global liquidity on receiving economies.
October 2009: This GFSR chronicles the evolution of the path toward reestablishing sound credit intermediation and the near-term risks that could interrupt its restoration, including the rising burden of sovereign financing. The report addresses how to restart securitization markets and the pitfalls if done improperly. The effectiveness of unconventional public sector interventions and the principles for disengagement are discussed. The report also discusses the design of medium-term policies that aim to reshape the financial system to make it more resilient and stable.
April 2009: The global financial system remains under severe stress as the crisis broadens to include households, corporations, and the banking sectors in both advanced and emerging market countries. In normal times, the Global Financial Stability Report aims to prevent crises by highlighting policies that may mitigate systemic risks, thereby contributing to financial stability and sustained economic growth. In the current crisis, the report traces the sources and channels of financial distress and provides policy advice on mitigating its effects on economic activity, stemming contagion, and mending the global financial system.
October 2008: With financial markets worldwide facing growing turmoil, internationally coherent and decisive policy measures will be required to restore confidence in the global financial system. The process of restoring an orderly system will be challenging, as a significant deleveraging is both necessary and inevitable. It is against this challenging and still evolving backdrop that the October 2008 Global Financial Stability Report frames recent events to suggest potential policy measures that could help address the current circumstances.
April 2008: The events of the past six months have demonstrated the fragility of the global financial system and raised fundamental questions about the effectiveness of the response by private and public sector institutions. The report assesses the vulnerabilities that the system is facing and offers tentative conclusions and policy lessons. The report reflects information available up to March 21, 2008.
September 2007: Since the April 2007 Global Financial Stability Report (GFSR), global financial stability has endured an important test. Credit and market risks have risen and markets have become more volatile. Markets are recognizing the extent to which credit discipline has deteriorated in recent years — most notably in the U.S. nonprime mortgage and leveraged loan markets, but also in other related credit markets.
April 2007: This particular issue draws, in part, on a series of discussions with commercial and investment banks, securities firms, asset management companies, hedge funds, insurance companies, pension funds, stock and futures exchanges, credit rating agencies, and academic researchers, as well as regulatory and other public authorities in major financial centers and countries. Contributions from Craig Martin and Kevin Roth (Association for Financial Professionals) in the conducting of a survey are gratefully acknowledged. The report reflects information available up to February 6, 2007.
September 2006: This particular issue draws, in part, on a series of discussions with commercial and investment banks, securities firms, asset management companies, hedge funds, insurance companies, pension funds, stock and futures exchanges, credit rating agencies, and academic researchers, as well as regulatory and other public authorities in major financial centers and countries. The report reflects information available up to July 14, 2006.
April 2006: This particular issue draws, in part, on a series of informal discussions with commercial and investment banks, securities firms, asset management companies, hedge funds, insurance companies, pension funds, stock and futures exchanges, and credit rating agencies, as well as regulatory authorities and academic researchers in many major financial centers and countries. The report reflects information available up to February 10, 2006
September 2005: This particular issue draws, in part, on a series of informal discussions with commercial and investment banks, securities firms, asset management companies, hedge funds, insurance companies, pension funds, stock and futures exchanges, and credit rating agencies, as well as regulatory authorities and academic researchers in many financial centers and countries. The report reflects information available up to July 22, 2005.
April 2005: This particular issue draws, in part, on a series of informal discussions with commercial and investment banks, securities firms, asset management companies, hedge funds, insurance companies, pension funds, stock and futures exchanges, and credit rating agencies, as well as regulatory authorities and academic researchers in many financial centers and countries. The report reflects information available up to February 16, 2005.
September 2004: This issue draws, in part, on a series of informal discussions with commercial and investment banks, securities firms, asset management companies, hedge funds, insurance companies, pension funds, stock and futures exchanges, and credit rating agencies in Canada, Colombia, France, Germany, Hong Kong SAR, Italy, Japan, Mexico, the Netherlands, Poland, Singapore, Switzerland, the United Kingdom, and the United States. The report reflects information available up to July 30, 2004
April 2004: This issue draws, in part, on a series of informal discussions with commercial and investment banks, securities firms, asset management companies, insurance companies, pension funds, stock and futures exchanges, and credit rating agencies in Brazil, Chile, China, Colombia, France, Germany, Hong Kong SAR, Hungary, Japan, Korea, Mexico, Poland, Russia, Singapore, South Africa, Thailand, the United Kingdom, and the United States. The report reflects mostly information available up to March 8, 2004
September 2003: This issue draws, in part, on a series of informal discussions with commercial and investment banks, securities firms, asset management companies, insurance companies, pension funds, stock and futures exchanges, and credit rating agencies in Brazil, Chile, China, Hong Kong SAR, Hungary, Poland, Russia, Singapore, South Africa, and Thailand, as well as the major financial centers. The report reflects mostly information available up to August 4.
March 2003: This issue of the Global Financial Stability Report marks the beginning of a new semiannual frequency for the publication. This issue draws, in part, on a series of informal discussions with commercial and investment banks, securities firms, asset management companies, insurance companies, pension funds, stock and futures exchanges, and credit rating agencies in Brazil, Chile, China, Hong Kong SAR, Hungary, Japan, Poland, Russia, Singapore, Thailand, the United Kingdom, and the United States. The report reflects mostly information available up to February 28, 2003.
December 2002: This is the fourth issue of the Global Financial Stability Report, a quarterly publication launched in March 2002 to provide a regular assessment of global financial markets and to identify potential systemic weaknesses that could lead to crises. This report reflects mostly information available up to November 4, 2002.
June 2002: This is the second issue of the Global Financial Stability Report. This particular issue draws, in part, on a series of informal discussions with commerical investment banks, securities firms, asset management companies, insurance companies, pension funds, stock and futures exchanges, and credit rating agencies in China, Germany, Hong Kong SAR, Hungary, Italy, Japan, Poland, Singapore, Switzerland, Thailand, the United Kingdom, and the United States. The report reflects mostly information available up to May 10, 2002.
September 2002: This is the third issue of the Global Financial Stability Report, a quarterly publication launched in March 2002 to provide a regular assessment of global financial markets and to identify potential systemic weaknesses that could lead to crises. By calling attention to potential fault lines in the global financial system, the report seeks to play a role in preventing crises before they erupt, thereby contributing to global financial stability and to the prospertity of the IMF's member countries.
March 2002: Reviews recent developments in global financial markets and explores the potential market impact of financial imbalances and continued credit quality deterioration. It also focuses on the expansion of credit risk transfer mechanisms -- such as credit derivatives and collateralized debt obligations -- as a means for distributing credit risks. The report concludes with two essays: one on Early Warning System models and another on alternative funding instruments for emerging market countries.
Source: International Monitary Fund
www.imf.org
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