Global Financial Stability Report
The Last Mile: Financial Vulnerabilities and Risks
April 2024
Chapter 1 documents that near-term global financial stability risks have receded amid expectations that global disinflation is entering its last mile. However, along it, there are several salient risks and a build-up of medium-term vulnerabilities.
Chapter 2 assesses vulnerabilities and potential risks to financial stability in corporate private credit, a rapidly growing asset class—traditionally focused on providing loans to midsize firms outside the realms of either commercial banks or public debt markets—that now rivals other major credit markets in size.
Chapter 3 shows that while cyber incidents have thus far not been systemic, the probability of severe cyber incidents has increased, posing an acute threat to macrofinancial stability.
Chapter 2 assesses vulnerabilities and potential risks to financial stability in private credit, a rapidly growing asset class—traditionally focused on providing loans to mid-sized firms outside the realms of either commercial banks or public debt markets—that now rivals other major credit markets in size. The chapter identifies important vulnerabilities arising from relatively fragile borrowers, a growing share of semi-liquid investment vehicles, multiple layers of leverage, stale and potentially subjective valuations, and unclear connections between participants. If private credit remains opaque and continues to grow exponentially under limited prudential oversight, these vulnerabilities could become systemic.
Given the potential risks posed by this fast-growing and interconnected asset class, authorities could consider a more proactive supervisory and regulatory approach to private credit. It is key to close data gaps and enhance reporting requirements to comprehensively assess risks. Authorities should closely monitor and address liquidity and conduct risks in funds—especially retail—that may be faced with higher redemption risks.
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Chapter 1 Data
