Global Financial Stability Report

Meeting New Challenges to Stability and Building a Safer System

April 2010

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.

©2010 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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Joint Foreword to World Economic Outlook and Global Financial Stability Report


Executive Summary (253KB pdf file)

Preface (108K pdf file)

Chapter I. Resolving the Crisis Legacy and Meeting New Challenges to Financial Stability

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A. How Has Global Financial Stability Changed?
B. Could Sovereign Risks Extend the Global Credit Crisis?
C. The Banking System: Legacy Problems and New Challenges
D. Risks to the Recovery in Credit
E. Assessing Capital Flows and Bubble Risks in the Post-Crisis Environment
F. Policy Implications
Annex 1.1. Global Financial Stability Map: Construction and Methodology
Annex 1.2. Assessing Proposals to Ban “Naked Shorts” in Sovereign Credit Default Swaps
Annex 1.3. Assessment of the Spanish Banking System
Annex 1.4. Assessment of the German Banking System
Annex 1.5. United States: How Different Are “Too-Important-to-Fail” U.S. Bank Holding Companies?
Annex 1.6. Analyzing Nonperforming Loans in Central and Eastern Europe Based on Historical Experience in Emerging Markets
Annex 1.7. Credit Demand and Capacity Estimates in the United States, Euro Area, and United Kingdom
Annex 1.8. The Effects of Large-Scale Asset Purchase Programs
Annex 1.9. Methodologies Underlying Assessment of Bubble Risks
Annex 1.10. Euro Zone Sovereign Spreads: Global Risk Aversion, Spillovers, or Fundamentals?

Chapter II. Systemic Risk and the Redesign of Financial Regulation

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Implementing Systemic-Risk-Based Capital Surcharges
Reforming Financial Regulatory Architecture Taking into Account Systemic Connectedness
Policy Reflections
Annex 2.1. Highlights of Model Specification

Chapter III. Making Over-the-Counter Derivatives Safer: The Role of Central Counterparties

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The Basics of Counterparty Risk and Central Counterparties
The Case for Over-the Counter Derivative Central Clearing
Incentivizing Central Counterparty Participation and the Role of End-Users
Criteria for Structuring and Regulating a Sound Central Counterparty
How Should Central Counterparties Be Regulated and Overseen?
One versus Multiple Central Counterparties?
Conclusions and Policy Recommendations

Chapter IV. Global Liquidity Expansion: Effects on “Receiving” Economies and Policy Response Options

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Overview of the 2007–09 Global Liquidity Expansion
Effects of the Global Liquidity Expansion on the Liquidity-Receiving Economies
Policy Response Options for Liquidity-Receiving Economies
Effectiveness of Capital Controls
Annex 4.1. Econometric Study on Liquidity Expansion: Data, Methodology, and Detailed Results
Annex 4.2a. Global Liquidity Expansion—Capital-Account-Related Measures Applied in Selected Liquidity-Receiving Economies
Annex 4.2b. Global Liquidity Expansion—Policy Responses Affecting the Capital Account in Selected Liquidity-Receiving Economies
Annex 4.3. Country Case Studies

Statistical Appendix (1428KB pdf file)

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


1.1 Explaining Swap Spreads and Measuring Risk Transmission among Euro Zone Sovereigns
1.2 Nonperforming Loans in Central and Eastern Europe: Is this Time Different?
1.3 Asian Residential Real Estate Markets: Bubble Trouble?
1.4 Could Conditions in Emerging Markets Be Building a Bubble?
1.5 Proposals to Address the Problem of “Too-Important-to-Fail” Financial Institutions
1.6 Estimating Potential Losses from Nonperforming Loans for Spain
1.7 Loan Loss Estimation for Germany
  2.1 Proposals for Systemic Risk Prudential Regulations
2.2 Assessing the Systemic Importance of Financial Institutions, Markets, and Instruments
2.3 Computing an Aggregate Loss Distribution
2.4 Regulatory Architecture Proposals
2.5 Contingent Capital—Part of the Solution to Systemic Risk?
  3.1 The Mechanics of Over-the-Counter Derivative Clearing
3.2 The Basics of Novation and Multilateral Netting
3.3 The Failure of Lehman Brothers and the Near-Failure of AIG
3.4 Central Counterparty Customer Position Portability and Collateral Segregation
3.5 History of Central Counterparty Failures and Near-Failures
3.6 The European and U.S. Regulatory Landscapes
3.7 Legal Aspects of Central Counterparty Interlinking and Cross-Margining
  4.1 Global Liquidity Expansion and Liquidity Transmission
4.2 Capital Controls versus Prudential Measures
4.3 Capital Controls on Outflows versus Inflows
4.4 Reserve Requirements and Unremunerated Reserve Requirements
4.5 Capital Account Measures—Event Study Results
4.6 Market Participant Views Regarding Effectiveness of Capital Controls


Data 1.1 Sovereign Market and Vulnerability Indicators
Data 1.2 Estimates of Global Bank Writedowns by Domicile, 2007–10
Data 1.3 Aggregate Bank Capital Positions
Data 1.4 United States: Bank Writedowns and Capital
Data 1.5 Spain: Bank Writedowns and Capital
Data 1.6 Germany: Bank Writedowns and Capital
Data 1.7 Projections of Credit Capacity for and Demand from the Nonfinancial Sector
Data 1.8 Asset Class Valuations
Data 1.9 Global Financial Stability Map Indicators
Data 1.10 Ten Largest Sovereign Credit Default Swap Referenced Countries
Data 1.11 Spain: Baseline and Adverse-Case Scenarios
Data 1.12 Spain: Calculations of Cutoff Rates for Banks with Drain on Capital
Data 1.13 Estimates of German Bank Writedowns by Sector, 2007–10
Data 1.14 Germany: Bank Capital, Earnings, and Writedowns
  2.1 Comparison of Some Methodologies to Compute Systemic-Risk-Based Charges
  2.2 System-Wide Capital Impairment Induced by Each Institution at Different Points in the Credit Cycle and Associated Systemic Risk Ratings
  2.3 Capital Surcharges Based on the Standardized Approach
  2.4 Systemic-Risk-Based Capital Surcharges through the Cycle
  2.5 Systemic-Risk-Based Cyclically Smoothed Capital Surcharges Across Countries
  2.6 Sample Systemic Risk Report
  3.1 Currently Operational Over-the-Counter Derivative Central Counterparties
  3.2 Incremental Initial Margin and Guarantee Fund Contributions Associated with Moving Bilateral Over-the-Counter Derivative Contracts to Central Counterparties
  4.1 Relation between Equity Returns, Official Foreign Exchange Reserve Accumulation, and Liquidity and Alternative Exchange Rate Regimes
  4.2 Fixed-Effects Panel least-Square Estimation of the Determinants of Asset Returns—41 Economies, January 2003–November 2009
  4.3 Fixed-Effects Panel Least-Square Estimation of the Determinants of Asset Returns—34 Economies, January 2003–December 2009
  4.4 Fixed-Effects Panel Least-Square Estimation of the Determinants of Equity Returns— Regional Disaggregation, 34 Economies, January 2003–December 2009
  4.5 Fixed-Effects Panel Least-Square Estimation of the Determinants of Capital Flows—34 Economies, January 2003–December 2009
  4.6 Granger Causality Relations between Global and Domestic Liquidity
  4.7 Determinants of Equity Returns, EGARCH (1,1) Specifications, January 2003–November 2009


Data 1.1 Global Financial Stability Map
Data 1.2 Macroeconomic Risks in the Global Financial Stability Map
Data 1.3 The Crisis Remains in Some Markets as Others Return to Stability
Data 1.4 Sovereign Debt to GDP in the G-7
Data 1.5 Sovereign Risks and Spillover Channels
Data 1.6 Contributions to Five-Year Sovereign Credit Default Swap Spreads
Data 1.7 The Four Stages of the Crisis
Data 1.8 Sovereign Credit Default Swap Curve Slopes
Data 1.9 Sovereign Risk Spilling over to Local Financial Credit Default Swaps, October 2009 to February 2010
Data 1.10 Regional Spillovers from Western Europe to Emerging Market Sovereign Credit Default Swaps
Data 1.11 Realized and Expected Writedowns or Loss Provisions for Banks by Region
Data 1.12 U.S. Loan-Charge-Off Rates
Data 1.13 Global Securities Prices
Data 1.14 U.S. Mortgage Market
Data 1.15 Banks’ Pricing Power—Actual and Forecast
Data 1.16 Bank Debt Rollover by Maturity Date
Data 1.17 Government-Guaranteed Bank Debt and Retained Securitization
Data 1.18 Euro Area Banking Profitability
Data 1.19 Net European Central Bank Liquidity Provision and Credit Default Swap Spreads
Data 1.20 Bank Credit to the Private Sector
Data 1.21 Bank Return on Equity and Percentage of Unprofitable Banks, 2008
Data 1.22 Banking System Profitability Indicators
Data 1.23 Real Nonfinancial Private Sector Credit Growth in the United States
Data 1.24 Average Lending Conditions and Growth in the Euro Area, United Kingdom, and United States
Data 1.25 Contributions to Growth in Credit to Nonfinancial Private Sector Credit Growth
Data 1.26 Nonfinancial Private Sector Credit Growth
Data 1.27 Total Net Borrowing Needs of the Sovereign Sector
Data 1.28 Credit to GDP
Data 1.29 Low Short-Term Interest Rates Are Driving Investors Out of Cash
Data 1.30 Emerging Market Returns Better on a Volatility-Adjusted Basis
Data 1.31 Cumulative Retail Net Flows to Equity and Debt Funds
Data 1.32 Refinancing Needs for Emerging Markets and Other Advanced Economies Remain Significant
Data 1.33 Emerging Market Real Equity Prices: Historical Corrections
Data 1.34 The Incentives for Foreign Exchange Carry Trades Are Recovering
Data 1.35 Real Domestic Credit Growth and Equity Valuation
Data 1.36 All Risks to Global Financial Stability and its Underlying Conditions Have Improved
Data 1.37 Evolution of the Global Financial Stability Map, 2007–09
Data 1.38 Net Notional Credit Default Swaps Outstanding as a Share of Total Government Debt
Data 1.39 Correlation of Daily Changes in Five-Year Greek Credit Default Swap and Bond Yield Spreads
Data 1.40 Sovereign Credit Default Swap Volumes, January 2009 to January 2010
Data 1.41 Spain: Nonperforming Loans
Data 1.42 Spain: Real Asset Repossessions
Data 1.43 Germany: Loan Loss Rates
Data 1.44 Germany: Loan Losses
Data 1.45 Argentina - NPLs as a Share of Total Loans
Data 1.46 Turkey - NPLs as a Share of Total Loans
Data 1.47 Impulse Response Functions, Model 1
Data 1.48 Impulse Response Functions, Model 2
Data 1.49 Change in Nonperforming Loan Ratio During 2009
Data 1.50 Contributions to Change in Local Government Yields
Data 1.51 Local Government Actual and Model Yields
Data 1.52 Fiscal Conditions
2.1 Network Structure of Cross-Border Interbank Exposures
2.2 Simulation Step 1: Illustration of the Evolution of Banks’ Balance Sheets at Different Points in the Cycle
2.3 Simulation Step 2: Illustration of Contagion Effects at Different Points in the Credit Cycle
2.4 An Illustration of the Computation of Incremental Value-at-Risk for Bank 1
2.5 Simulation of Systemic Risk Capital Surcharges
2.6 Regulatory Forbearance under a Multiple Regulator Configuration
2.7 Regulatory Forbearance under a Multiple Regulator Configuration with Systemic Oversight Mandate
2.8 Regulatory Forbearance under Multiple and Unified Regulator Configurations with Oversight Mandate over Systemic Institutions
Chart Data 3.1 Global Over-the-Counter Derivatives Markets
Chart Data 3.2 Outstanding Credit Defaults Swaps in the Depository Trust & Clearing Corporation Data Warehouse
Chart Data 3.3 Derivative Payables plus Posted Cash Collateral
3.4 Typical Central Counterparty Lines of Defense against Clearing Member Default
Chart Data 4.1 Global Liquidity
Chart Data 4.2 Change of Central Bank Policy Rates
Chart Data 4.3 Liquidity-Receiving Economies: Composition of Capital Inflows
Chart Data 4.4 Emerging Markets Equity Indices
4.5 Brazil
4.6 Colombia
4.7 Thailand
4.8 Croatia
4.9 Korea

Statistical Appendix

Key Financial Centers


Chart Data 1. Major Net Exporters and Importers of Capital in 2009
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 Indices
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, 2008
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 and Other Markets


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


Data 10. MSCI 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

The following symbols have been used throughout this volume: . . . 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.