Global Financial Stability Report
Containing Systemic Risks and Restoring Financial Soundness
April 2008
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.
©2008 International Monetary Fund
Ordering Information
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 | |||||
|
Chart Chart Chart Chart |
Data Data Data Data |
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 | ||||
|
Chart Chart Chart |
Data Data Data |
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) | ||||
| Chart Chart |
Data Data |
2.3 | When Is a AAA not a AAA? (Part 2: Actual versus Market-Implied Mortgage-Backed Security Ratings) | ||
| Chart Chart |
Data Data |
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-à-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 | ||
| Chart |
Data Data Data Data Data |
1.34 | Global Financial Stability Map: Monetary and Financial Conditions | ||
| Chart |
Data Data Data Data |
1.35 | Global Financial Stability Map: Risk Appetite Conditions | ||
| Chart |
Data Data Data Data Data |
1.36 | Global Financial Stability Map: Macroeconomic Risks | ||
| Chart |
Data Data Data Data Data |
1.37 | Global Financial Stability Map: Emerging Market Risks | ||
| Chart |
Data Data Data Data Data |
1.38 | Global Financial Stability Map: Credit Risks | ||
| Chart |
Data Data Data Data Data Data |
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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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. |