## GLOBAL FINANCIAL STABILITY REPORT — Key Highlights (2025 OCT)

## Source details

**Canonical URL:** [GLOBAL FINANCIAL STABILITY REPORT — Key Highlights (2025 OCT)](https://www.imf.org/-/media/files/publications/gfsr/2025/october/english/infographic.pdf)

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### Overall message
- Beneath the calm in financial markets, shifting ground poses new challenges to stability.
- The global foreign exchange (FX) market has grown over time but remains highly susceptible to uncertainty shocks.
- Increased domestic ownership of local currency EM bonds alleviates external vulnerabilities but some risks remain.
- Remain attentive to potential risks to inflation.
- Curb excessive government deficits.
- Implement internationally agreed-upon prudential standards.
- Strengthen financial sector safety nets and oversight on NBFIs.
- Promote effective regulation and supervision of stablecoins.

### FX market vulnerability and policy guidance
- The panel shows weekly excess exchange rate return volatility (bars) and bid–ask spreads (diamonds) against the USD following large macro-financial uncertainty shocks, measured by the VIX and the US economic policy uncertainty (EPU) index.
- Shocks are defined as periods when the unexplained component (residual) of uncertainty measures rises sharply, more than two standard deviations above the average.
- Axis labels presented: 0, 0.5, 1.0, 1.5 (left axis); 0, 0.04, 0.08, 0 .12, 0 .16 (right axis).
- Policy recommendations:
  - Strengthen macroeconomic fundamentals to improve fiscal sustainability and debt-carrying capacity.
  - Deepen local debt markets and strengthen market infrastructure to reduce vulnerabilities to external shocks.
  - Diversify investor base to mitigate concentration risks and foster development of domestic institutional investors.
  - Strengthen surveillance to monitor systemic risks arising from FX market stress.
  - Maintain strong capital and liquidity buffers, supported by robust crisis management frameworks.
  - Enhance operational resilience of key FX market participants, including safeguards against cyber risks.
  - Encourage broader use of payment-versus-payment arrangements to reduce settlement risks.

### Changes to EMDEs’ local currency government bond market investor base
- Changes are from 2012 to 2024. The chart reflects median values derived from a baseline sample of 29 EMDEs.
- Percent share categories illustrated: Domestic banks; Other residents; Domestic NBFIs; Nonresidents.

### Market volatility and valuations
- Market volatility has declined since the April 2025 GFSR despite still-elevated uncertainties.
- Percentile (since Jan. 2015) metrics shown for VIX and Global Economic Policy Uncertainty Index across GFSR releases:
  - Oct. 2024 GFSR to Apr. 2025 GFSR
  - Apr. 2025 GFSR to Oct. 2025 GFSR
  - Oct. 2025 GFSR
  - Apr. 2025 GFSR
- Equity index forward P/E (percentile since 1990) comparisons by region:
  - USA
  - AEs ex. US
  - EMs

### Stretched asset valuation
- Stretched asset valuation is highlighted as a risk.

### Mounting fiscal strain
- World general government debt (Percent of GDP):
  - 2019: 84%
  - 2022: 90%
  - 2025 estimate: 95%

### Increasing bank–NBFI interconnectedness and stablecoins
- US and EU banks’ exposure* to NBFIs (USD trillion):
  - Loans: $2.6 trillion
  - Undrawn Commitments: $1.9 trillion
  - Total shown: $4.5 trillion (9% of overall loan portfolio)
  - *Data for US banks as of 2Q2025 while EU banks as of 4Q2024.
- Stablecoins market capitalization:
  - 2019: $3 billion
  - 2025 estimate: $230 billion

*Sources: Bloomberg Finance L.P.; European Banking Authority; Federal Financial Institutions Examination Council Reports of Condition and Income; MSCI; IMF Global Debt database; and IMF staff calculations.*

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_Source: https://www.imf.org/-/media/files/publications/gfsr/2025/october/english/infographic.pdf_