Follow Us

Follow us on Twitter  Follow us on LinkedIn
 

20 May 2008

IMF still sees continued serious risks to global financial stability


Despite some signs of normalization in global credit markets, the IMF warned that policymakers need to avoid complacency and prepare for further pressures.

Despite some signs of normalization in global credit markets, IMF First Deputy Managing Director John Lipsky warned that “policymakers need to avoid complacency and take steps to restore confidence, while at the same time preparing for further pressures”.

 

While it is reassuring that Asia has so far escaped serious downdrafts from the U.S. subprime crisis, capital markets are now so interlinked that it would be prudent to act proactively to respond to the risk of spillovers, Lipsky said, and warned of the risk that global growth could weaken more than generally anticipated.

 

Lipsky recommended measures to strengthen financial markets. Among others, supervisors and regulators need to ensure that financial institutions employ better risk management. This has to involve more effective and stricter consolidated supervision, as well as other steps to reduce the incentive to move assets off their balance sheets.

 

Furthermore, central bank liquidity facilities have to be flexible enough to provide support to solvent but liquidity impaired banks, and deposit insurance and bank resolution need to be designed in ways to avoid problems in one bank eroding confidence in the system as a whole.

 

IMF Survey



© International Monetary Fund


< Next Previous >
Key
 Hover over the blue highlighted text to view the acronym meaning
Hover over these icons for more information



Add new comment