Cover of the Global Financial Stability Report (GFSR)

World Economic and Financial Surveys

Global Financial Stability Report

Containing Systemic Risks and
Restoring Financial Soundness

April 2008

©2008 International Monetary Fund
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The Global Financial Stability Report provides semiannual assessments of global financial markets and addresses emerging market financing in a global context.*

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View the Full Text of the GFSR (use the free Adobe Acrobat Reader).

Contents

Preface(90KB pdf file)
 
Executive Summary(90KB pdf file)
 
Chapter I. Assessing Risks to Global Financial Stability
Full Text    |   Boxes   |    Figures   |   Tables
 
  Global Financial Stability Map
  Credit Deterioration -- How Deep and Widespread?
  Systemic Risks Have Risen Sharply
  Will Emerging Markets Remain Resilient?
  Credit Squeeze or Credit Crunch?
  Immediate Policy Challenges
  Annex 1.1. Global Financial Stability Map: Construction and Methodology
  Annex 1.2. Methodology for Calculating Global Losses and Bank Exposures
  References
 
Chapter II. Structured Finance: Issues of Valuation and Disclosure
Full Text   |   Summary   |   Boxes   |    Figures
 
  Valuation and Disclosure of Complex Structured Finance Products
  The Role of Off-Balance-Sheet Entities
  Conclusions and Outlook
  Annex 2.1. The World According to GAAP
  References
 
Chapter III. Market and Funding Illiquidity: When Private Risk Becomes Public
Full Text   |   Summary   |   Figures
 
  The Nature of Market Liquidity Risks
  Funding Liquidity Risks
  Market and Funding Liquidity Dynamics
  Liquidity Dynamics Since July 2007: An Empirical Investigation
  The Role of Central Banks During Periods of Market and Funding Illiquidity
  Central Banks' Response to Liquidity Strains Since July 2007: An Empirical Investigation
  Recommendations to Enhance Liquidity Risk Management
  Conclusion
  Annex 3.1. Liquidity Dynamics Since Summer 2007
  References
 
Glossary (270KB pdf file)
 
Annex: Summing Up by the Acting Chair
 
Statistical Appendix(1,331KB pdf file)
Key Financial Centers:      Figures    |   Tables
Emerging Markets:           Figures    |   Tables
Financial Soundness Indicators:           Tables
 
Boxes
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1.1 Outlook for U.S. High-Yield Corporate Debt Markets and Default Rates
Chart Data 1.2 Do Sovereign Wealth Funds Have a Volatility-Absorbing Market Impact?
Chart Data 1.3 The Rise in Balance Sheet Leverage of Global Banks
    1.4 Quantitative Financial Stability Modeling
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1.5 Banking Stability Index
Chart Data 2.1 Structured Finance: What Is It and How Did It Get So Large?
2.2 When Is a AAA not a AAA? (Part 1: The ABCs of MBSs and CDOs)
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2.3 When Is a AAA not a AAA? (Part 2: Actual versus Market-Implied Mortgage-Backed Security Ratings)
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2.4 When Is a AAA not a AAA? (Part 3: Collateralized Debt Obligation Rating Dynamics)
Chart Data 2.5 Conduits, SIVs and SIV-Lites
Chart Data 2.6 Consolidation of Structured Investment Vehicles: An Illustrative Example of Issues That Arise
    3.1 The Determinants of Market Liquidity
    3.2 Liquidity-Adjusted Value-at-Risk: At the Forefront of Market Liquidity Risk Management?
    3.3 Standard Ways to Measure and Control Bank Liquidity Risks
    3.4 Institute of International Finance Principles of Liquidity Risk Management
    3.5 Central Bank Counterparties
    3.6 Liquidity Regulation and the Basel Process
 
Tables
Chart Data 1.1 Estimates of Financial Sector Potential Losses as of March 2008
Chart Data 1.2 Typical "Haircut" or Initial Margin
Chart Data 1.3 Macro and Financial Indicators in Selected Emerging Market Countries
1.4 Changes in Risks and Conditions Since the October 2007 Global Financial Stability Report
Chart Data 1.5 Losses by Asset Class as of March 2008
Chart Data 1.6 Global Bank Losses as of March 2008
    2.1 Accounting for Securities Held as Financial Assets
    2.2 U.S. Subprime Exposures and Losses
    2.3 Market Participants in Credit Derivatives, 2004 and 2006
    3.1 Impact of Central Bank Interventions on LIBOR-OIS Spreads
 
Figures
Chart Data 1.1 Global Financial Stability Map
Chart Data 1.2 Mortgage Delinquencies by Vintage Year
Chart Data 1.3 U.S. Mortgage-Related Securities Prices
Chart Data 1.4 U.S. and European House Price Changes
Chart Data 1.5 U.S. and UK Nonconforming Delinquencies by Mortgage Vintage Year
Chart Data 1.6 Commercial Mortgage Borrowing and Real Estate Prices
Chart Data 1.7 CMBX Spreads
Chart Data 1.8 Charge-Off Rates for U.S. Consumer Loans
Chart Data 1.9 Credit Card Charge-Off Rates versus Credit Card Asset-Backed Spreads on Securities
Chart Data 1.10 LCDX Prices and Spreads
Chart Data 1.11 U.S. Leveraged Buyout Loans: Credit Quality Indicators
Chart Data 1.12 Comparison of Financial Crises
Chart Data 1.13 Expected Bank Losses as of March 2008
Chart Data 1.14 Financial Guarantors
Chart Data 1.15 Systemic Bank Default Risk
Chart Data 1.16 Securitization Volume in the European Union (EU-15)
Chart Data 1.17 Bank Equity Price Changes and Balance Sheet Leverage
Chart Data 1.18 U.S. Funding Market Liquidity
Chart Data 1.19 Euro Area Funding Market Liquidity
Chart Data 1.20 Decomposing Interbank Spreads
Chart Data 1.21 External Position of Emerging Markets by Region vis--vis BIS Reporting Banks
Chart Data 1.22 Selected European Banks: Dependence on Wholesale Funding as of March 2008
Chart Data 1.23 Central and Eastern Europe: Growth in Private Credit and House Prices, 2002-06
Chart Data 1.24 Baltic States, Bulgaria, and Romania: Credit to Households by Type
Chart Data 1.25 Baltic States' 5-Year Credit Default Swap Spreads and Romanian Leu
Chart Data 1.26 Emerging Markets: Private Sector External Bond Issuance
Chart Data 1.27 Carry-Trade Index and Currency Volatility
Chart Data 1.28 Heat Map: Developments in Systemic Asset Classes
Chart Data 1.29 Spreads Across Credit: Historical Highs, Lows, and Current Levels
Chart Data 1.30 U.S. Private Sector Net Debt Issuance by Sector
Chart Data 1.31 G-3 Bank Lending Conditions
Chart Data 1.32 U.S. Private Sector Borrowing
Chart Data 1.33 Impulse Response of U.S. GDP to Credit Shocks
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1.34 Global Financial Stability Map: Monetary and Financial Conditions
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1.35 Global Financial Stability Map: Risk Appetite Conditions
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1.36 Global Financial Stability Map: Macroeconomic Risks
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1.37 Global Financial Stability Map: Emerging Market Risks
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1.38 Global Financial Stability Map: Credit Risks
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1.39 Global Financial Stability Map: Market and Liquidity Risks
Chart Data 2.1 Selected U.S.-Based Financial Institutions: Change in Level 3 and 2 Assets
  2.2 Writedowns of Selected Financial Institutions: October 15, 2007-February 14, 2008
  2.3 Timelines for Implementation of Basel II Framework
Chart Data 2.4 Market Participants in Credit Derivatives, 2006
Chart Data 2.5 Structured Credit Products by Market Participants
Chart Data 2.6 Financial Guaranty Industry Insured Portfolio Distribution, 2006
Chart Data 3.1 Commercial Banks: Deposit-to-Asset Ratios
Chart Data 3.2 Aggregate Bank Credit Default Swap Rate and Selected Spreads
Chart Data 3.3 United States: Selected Money Market Spreads
Chart Data 3.4 United States: S&P 500 Stock Market Returns and Aggregate Credit Default Swap Rate
Chart Data 3.5 On-the-Run/Off-the-Run Five-Year U.S. Treasury Note Spread
Chart Data 3.6 U.S. Model: Selected Implied Correlations from Dynamic Conditional Correlation GARCH Specification
Chart Data 3.7 Advanced Economies Model: Selected Implied Correlations from Dynamic Conditional Correlation GARCH Specification
Chart Data 3.8 Three-Month LIBOR to Overnight Index Swap Spreads
Chart Data 3.9 Central Bank Key Policy and Overnight Money Market Rates
Chart Data 3.10 European Central Bank's Liquidity Provision and Reserve Holdings
Chart Data 3.11 Euro Area: Selected European Central Bank Policy Actions and Term Funding Stress
Chart Data 3.12 United States: Selected Federal Reserve Policy Actions and Term Funding Stress
Chart Data 3.13 U.S. Model: Implied Correlations from Dynamic Conditional Correlation GARCH Specification
Chart Data 3.14 Advanced Economies Model: Implied Correlations from Dynamic Conditional Correlation GARCH Specification
Chart Data 3.15 Emerging Markets Model: Implied Correlations from Dynamic Conditional Correlation GARCH Specification
 
Statistical Appendix
    Key Financial Centers
  Figures
Chart Data 1. Major Net Exporters and Importers of Capital in 2007
Chart Data 2. Exchange Rates: Selected Major Industrial Countries
Chart Data 3. United States: Yields on Corporate and Treasury Bonds
Chart Data 4. Selected Spreads
Chart Data 5. Nonfinancial Corporate Credit Spreads
Chart Data 6. Equity Markets: Price Indexes
Chart Data 7. Implied and Historical Volatility in Equity Markets
Chart Data 8. Historical Volatility of Government Bond Yields and Bond Returns for Selected Countries
Chart Data 9. Twelve-Month Forward Price/Earnings Ratios
Chart Data 10. Flows into U.S.-Based Equity Funds
Chart Data 11. United States: Corporate Bond Market
Chart Data 12. Europe: Corporate Bond Market
Chart Data 13. United States: Commercial Paper Market
Chart Data 14. United States: Asset-Backed Securities
 
  Tables
  Data 1. Global Capital Flows: Inflows and Outflows
  Data 2. Global Capital Flows: Amounts Outstanding and Net Issues of International Debt Securities by Currency of Issue and Announced International Syndicated Credit Facilities by Nationality of Borrower
  Data 3. Selected Indicators on the Size of the Capital Markets, 2006
  Data 4. Global Over-the-Counter Derivatives Markets: Notional Amounts and Gross Market Values of Outstanding Contracts
  Data 5. Global Over-the-Counter Derivatives Markets: Notional Amounts and Gross Market Values of Outstanding Contracts by Counterparty, Remaining Maturity, and Currency
  Data 6. Exchange-Traded Derivative Financial Instruments: Notional Principal Amounts Outstanding and Annual Turnover
  Data 7. United States: Sectoral Balance Sheets
  Data 8. Japan: Sectoral Balance Sheets
  Data 9. Europe: Sectoral Balance Sheets
 
    Emerging Markets
  Figures
Chart Data 15. Emerging Market Volatility Measures
Chart Data 16. Emerging Market Debt Cross-Correlation Measures
 
  Tables
  Data 10. Equity Market Indices
  Data 11. Foreign Exchange Rates
  Data 12. Emerging Market Bond Index: EMBI Global Total Returns Index
  Data 13. Emerging Market Bond Index: EMBI Global Yield Spreads
  Data 14. Emerging Market External Financing: Total Bonds, Equities, and Loans
  Data 15. Emerging Market External Financing: Bond Issuance
  Data 16. Emerging Market External Financing: Equity Issuance
  Data 17. Emerging Market External Financing: Loan Syndication
  Data 18. Equity Valuation Measures: Dividend-Yield Ratios
  Data 19. Equity Valuation Measures: Price-to-Book Ratios
  Data 20. Equity Valuation Measures: Price/Earnings Ratios
  Data 21. United States: Mutual Fund Flows
 
   Financial Soundness Indicators
  Tables
  Data 22. Bank Regulatory Capital to Risk-Weighted Assets
  Data 23. Bank Capital to Assets
  Data 24. Bank Nonperforming Loans to Total Loans
  Data 25. Bank Provisions to Nonperforming Loans
  Data 26. Bank Return on Assets
  Data 27. Bank Return on Equity

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