Global Financial Stability Report

Responding to the Financial Crisis and Measuring Systemic Risks

April 2009

©2009 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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Preface (457KB pdf file)

Joint Foreword to World Economic Outlook and Global Financial Stability Report

Executive Summary (752KB pdf file)

Chapter I. Stabilizing the Global Financial System and Mitigating Spillover Risks

Full Text    |   Boxes   |    Figures   |   Tables

A. Global Financial Stability Map
B. Global Deleveraging and its Consequences
C. The Crisis has Engulfed Emerging Markets
D. The Deteriorating Outlook for Household and Corporate Defaults in Mature Markets and Implications for the Financial System
E. Stability Risks and the Effectiveness of the Policy Response
F. Costs of Official Support, Potential Spillovers, and Policy Risks
Annex 1.1. Global Financial Stability Map: Construction and Methodology
Annex 1.2. Predicting Private "Other Investment" Flows and Credit Growth in Emerging Markets
Annex 1.3. Spillovers Between Foreign Banks and Emerging Market Sovereigns
Annex 1.4. Debt Restructuring in Systemic Crises
Annex 1.5. Methodology for Estimating Financial Writedowns

Chapter II. Assessing the Systemic Implications of Financial Linkages

Full Text   |   Boxes   |    Figures   |   Press Points

Four Methods of Assessing Systemic Linkages
How Regulators Assess Systemic Linkages
Policy Reflections
Annex 2.1. Default Intensity Model Estimation

Chapter III. Detecting Systemic Risk

Full Text   |   Boxes   |   Figures   |   Press Points

What Constitutes "Systemic" Risk?
"Fundamental" Characteristics of Intervened and Nonintervened Financial Institutions
Market Perceptions of Risk of Financial Institutions
Identifying Systemic Risks Through Regime Shifts
Role of Global Market Conditions During Episodes of Stress
Policy Implications
Annex 3.1. Financial Soundness Indicators
Annex 3.2. Groups of Selected Financial Institutions
Annex 3.3. List of Intervened Financial Institutions

Glossary (644KB pdf file)

Annex: Summing Up by the Acting Chair

Statistical Appendix(1259KB pdf file)

Key Financial Centers:      Figures    |   Tables
Emerging Markets:           Figures    |   Tables
Financial Soundness Indicators:           Tables


    1.1 Near-Term Financial Stability Challenges and Policy Priorities
1.2 Cross-Border Exposures and Financial Interlinkages within Europe
  1.3 Effects of the Global Financial Crisis on Trade Finance: The Case of Sub-Saharan Africa
1.4 Enhanced IMF Lending Capabilities and Implications for Emerging Markets
   Data 1.5 Modeling Corporate Bond Spreads: A Capital Flows Framework
Data 1.6 Recent Unconventional Measures of Selected Major Central Banks
1.7 Forecasts for Charge-Offs on U.S. Bank Loans
    2.1 Network Simulations of Credit and Liquidity Shocks
2.2 Quantile Analysis
2.3 Default Intensity Model Specification
2.4 Basics of Over-the-Counter Counterparty Credit Risk Mitigation
2.5 A Central Counterparty as a Mitigant to Counterparty Risk in the Credit Default Swap Markets
Chart Data 3.1 Modeling Risk-Adjusted Balance Sheets: The Contingent Claims Approach
3.2 Option-iPoD Measures of Risk Across Financial Institutions
    3.3 Higher Moments and Multivariate Dependence of Implied Volatilities from Equity Options as Measures of Systemic Risk
    3.4 The Consistent Information Multivariate Density Optimizing Approach
Chart Data 3.5 Spillovers to Emerging Markets: A Multivariate GARCH Analysis
3.6 The Transformation of Bank Risk into Sovereign Risk—The Tale of Credit Default Swaps


Chart Data 1.1 Macro and Financial Indicators in Selected Emerging Market Countries
Chart Data 1.2 Potential Writedowns and Capital Needs for Emerging Market Banks by Region
Chart Data 1.3 Estimates of Financial Sector Potential Writedowns (2007-10) by Geographic Origin of Assets as of April 2009
Chart Data 1.4 Bank Equity Requirement Analysis
Chart 1.5 Policy Measures and Effectiveness
Chart   1.6 Tentative Easing in Credit Conditions
Chart Data 1.7 Bank Wholesale Financing and Public Funding Support
Chart Data 1.8 Public Debt and Stabilization Costs
Chart Data 1.9 Mature Market Sovereign Credit Default Swap Spreads and Debt Outstanding
Chart Data 1.10 Announced Sovereign Guaranteed Bank Debt
Chart 1.11 Changes in Risks and Conditions Since the October 2008 Global Financial Stability Report
Chart Data 1.12 Distress Dependence Matrices: Sovereigns and Banks
Chart Data 1.13 Estimated Bank Portfolio Composition by Type of Asset
Chart Data 1.14 Estimated Bank Portfolio Composition by Origin of Assets
Chart Data 1.15 Estimated Distribution of Bank Writedowns by Bank Domicile and Cumulative Loss Rates
    2.1 Taxonomy of Financial Linkages Models
    2.2 Simulation 1 Results (Credit Channel)
    2.3 Post-Simulation 1 Capital Losses
    2.4 Simulation 2 Results (Credit and Funding Channel)
    2.5 Post-Simulation 2 Capital Losses
    2.6 Conditional Co-Risk Estimates, March 2008
    2.7 Conditional Co-Risk Estimates, September 2008
    2.8 Distress Dependence Matrix
    2.9 Summary of Various Methodologies: Limitations and Policy Implications
    3.1 Selected Indicators on Fundamental Characteristics in Financial Institutions
    3.2 Taxonomy of Credit Risk Models
    3.3 Correlations Among 45 Financial Institutions During Different Stress Periods
    3.4 Cluster Analysis
    3.5 Summary of Various Methodologies: Limitations and Policy Implications


Data 1.1 Global Financial Stability Map
Data 1.2 Heat Map: Developments in Systemic Asset Classes
Data 1.3 Ratio of Debt to GDP Among Selected Advanced Economies
Data 1.4 Bank Credit to the Private Sector
Data 1.5 Private Sector Credit Growth
Data 1.6 Bank for International Settlements Reporting Banks: Cross-Border Liabilities, Exchange-Rate-Adjusted Changes
Data 1.7 Bank for International Settlements Reporting Countries: Cross-Border Assets as a Proportion of Total Assets
Data 1.8 Aggregate Emerging Markets Bond Index Global Spread
Data 1.9 Net Foreign Equity Investment in Emerging Economies
Data 1.10 Emerging Market Hedge Funds: Estimated Assets and Net Asset Flows
Data 1.11 Heat Map: Developments in Emerging Market Systemic Asset Classes
Data 1.12 Emerging Europe: Real Credit Growth to the Private Sector and Output
Data 1.13 Emerging Market Performance of Credit Default Swap Spreads and Equity Prices
Data 1.14 Cross-Currency Basis Swap Spreads
Data 1.15 Emerging Market Real Credit Growth
Data 1.16 External Debt Refinancing Needs
Data 1.17 Emerging Market Corporate Bond Spreads
Data 1.18 Aggregate Emerging Market Bond Index Global Spread
Data 1.19 Distress Dependence between Emerging Market Sovereigns and Advanced Country Banks
Data 1.20 U.S. Loan Charge-Off Rates: Baseline
Data 1.21 Delinquency Rate of U.S. Residential Mortgage Loans
Data 1.22 Spreads on Commercial Mortgage-Backed Securities
Data 1.23 Spreads on Consumer Credit Asset-Backed Securities
Data 1.24 Global Corporate Default Rates
Data 1.25 Average Recovery Rates on Defaulted U.S. Bonds
Data 1.26 Corporate Credit Default Swap Spreads
Data 1.27 Estimates of Economic Growth and Financial Sector Writedowns
Data 1.28 U.S. and European Bank and Insurance Company Market Capitalization, Writedowns, and Capital Infusions
Data 1.29 U.S. and European (including U.K.) Bank Earnings and Writedowns
Data 1.30 Commercial Bank Loan Charge-Offs
Data 1.31 European Securitization Gross Issuance
Data 1.32 Refinancing Gap of Global Banks
Data 1.33 Pension Funds of Large U.S. and European Companies: Estimated Funding Levels
Data 1.34 Insurance Sector Credit Default Swaps Spreads
Data 1.35 Large Economy Credit Default Swap Spreads
Data 1.36 Benchmark Five-Year Government Bonds
Data 1.37 Swap Spreads of Government-Guaranteed Bonds
1.38 Global Financial Stability Map: Monetary and Financial Conditions
1.39 Global Financial Stability Map: Risk Appetite
1.40 Global Financial Stability Map: Macroeconomic Risks
1.41 Global Financial Stability Map: Emerging Market Risks
1.42 Global Financial Stability Map: Credit Risks
1.43 Global Financial Stability Map: Market and Liquidity Risks
Data 1.44 Impulse Responses
Data 1.45 Net Private Other Investment Flows to Emerging Markets
Data 1.46 Emerging Market Real Credit Growth
Data 1.47 Emerging Market GDP Growth
Data 1.48 Default Probabilities Implied by Credit Default Swap Pricing
Data 1.49 Distress Dependence
2.1 Network Analysis: A Diagrammatic Representation of Systemic Interbank Exposures
Chart Data 2.2 Network Analysis: Number of Induced Failures
Chart Data 2.3 Network Analysis: Country-by-Country Vulnerability Level
2.4 Network Analysis: Contagion Path Triggered by the U.K. Failure
Chart Data 2.5 AIG and Lehman Brothers Default Risk Codependence
2.6 A Diagrammatic Depiction of Co-Risk Feedbacks
2.7 U.S. and European Banks: Tail-Risk Dependence Devised from Equity Option Implied Volatility, 2006-08
2.8 Legend of Trivariate Dependence Simplex
2.9 Annual Number of Corporate and Banking Defaults
2.10 Actual and Fitted Economy Default Rates
2.11 Default Rate Probability and Number of Defaults
2.12 Quarterly One-Year-Ahead Forecast Value-at-Risk at 95 Percent Level
2.13 Capital Adequacy Ratios (CAR) After Hypothetical Credit Shocks
2.14 Basic Structure of the Systemic Risk Monitor Model
2.15 RAMSI Framework
Chart Data 3.1 Capital-to-Assets Ratio
Chart Data 3.2 Ratio of Short-Term Debt to Total Debt
Chart Data 3.3 Return on Assets
3.4 Dendrogram
Chart Data 3.5 U.S. and European Banks: Joint Tail Risk of Implied Volatilities
Chart Data 3.6 Higher Moments and Multivariate Dependence of Implied Equity Volatility
Chart Data 3.7 Joint Probability of Distress (JPoD) and Banking Stability Index (BSI): Core 2 Group
Chart Data 3.8 Joint Probability of Distress (JPoD) and Banking Stability Index (BSI): By Geographic Region
Chart Data 3.9 Daily Percentage Change: Joint and Average Probability of Distress, Core 2 Group
Chart Data 3.10 Probability of Cascade Effects
Chart Data 3.11 Markov-Regime Switching ARCH Model: Joint Probability of Distress and Banking Stability Index
Chart Data 3.12 Euro-Dollar Forex Swap
Chart Data 3.13 Markov-Switching ARCH Model of VIX
Chart Data 3.14 Markov-Switching ARCH Model of TED Spread
Chart Data 3.15 Markov-Switching ARCH Model of VIX, TED Spread, and Core 2 Banking Stability Index

Statistical Appendix

Key Financial Centers


Chart Data 1. Major Net Exporters and Importers of Capital in 2008
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


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 Signed International Syndicated Credit Facilities by Nationality of Borrower
Data 3. Selected Indicators on the Size of the Capital Markets, 2007
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


Chart Data 15. Emerging Market Volatility Measures
Chart Data 16. Emerging Market Debt Cross-Correlation Measures


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. Emerging Markets: Mutual Fund Flows

Financial Soundness Indicators


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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. . . to indicate that data are not available;
—— to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist;

- between years or months (for example, 1997-99 or January-June) to indicate the years or months covered, including the beginning and ending years or months;

/ between years (for example, 1998/99) to indicate a fiscal or financial year.

"Billion" means a thousand million; "trillion" means a thousand billion.

"Basis points" refer to hundredths of 1 percentage point (for example, 25 basis points are equivalent to 1/4 of 1 percentage point). "n.a." means not applicable.

Minor discrepancies between constituent figures and totals are due to rounding.
As used in this volume the term "country" does not in all cases refer to a territorial entity that is a state as understood by international law and practice. As used here, the term also covers some territorial entities that are not states but for which statistical data are maintained on a separate and independent basis.
On this site, the term "country" does not in all cases refer to a territorial entity that is a state as understood by international law and practice. As used here, the term also covers some territorial entities that are not states. Dependent territories of member countries are listed alphabetically followed by a description of the constitutional relationships with their member countries.