{
  "title": "Transitions to Financial Stability: A Bumpy Ride",
  "publication": "IMF Blog, October 9, 2013",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2013/10/09/transitions-to-financial-stability-a-bumpy-ride",
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  "summary": "The global financial system faces several major transitions along the road to greater financial stability. These transitions are accompanied by substantial risks.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- The global financial system faces several major transitions along the road to greater financial stability. These transitions are accompanied by substantial risks.\n- Five transitions highlighted:\n  - Transition in the United States from prolonged monetary accommodation towards a normalization of monetary conditions.\n  - Emerging markets’ transition to more volatile external conditions and higher risk premiums.\n  - Euro area movement to a stronger union and stronger financial systems, with close links between corporate and banking sectors.\n  - Japan’s move towards the new policy regime of Abenomics.\n  - Global transition to a safer financial system requiring completion of regulatory reforms."
    },
    {
      "heading": "U.S. monetary transition and global impact",
      "content": "- Findings and risks:\n  - The transition to monetary normalization in the United States will be unprecedented and complex.\n  - Long-term interest rates could overshoot.\n  - Since May, there has been a sharp rise in bond yields and volatility.\n  - Lower market liquidity and over-extended allocations to bonds could amplify risks.\n  - Higher interest rates may reveal weak links in the shadow banking system, exacerbating market and liquidity strains.\n  - Example: mortgage real estate investment trusts are highly leveraged and susceptible to funding runs; forced asset sales could disrupt the mortgage-backed securities market and spread to broader asset markets.\n- Policy recommendations:\n  - A clear and well-timed communication strategy by the U.S. Federal Reserve to minimize interest rate volatility.\n  - Effective execution aligned with economic developments.\n  - Increased macro-prudential oversight and transparency in the shadow banking system to preserve financial stability and allow the Fed to focus on a smooth exit."
    },
    {
      "heading": "Emerging markets",
      "content": "- Key facts and vulnerabilities:\n  - Since the Lehman crisis, bond inflows into emerging markets have risen by more than one trillion dollars.\n  - This inflow is well above its long-term trend by almost half a trillion dollars, boosting emerging market corporate borrowing to record levels.\n  - Events since May point to new financial stability concerns.\n  - Foreign investors play a bigger role in local debt markets.\n  - Market liquidity has deteriorated in recent years, making local interest rates more sensitive to changes in investor sentiment.\n  - Corporate balance sheets have weakened, financial vulnerabilities are rising, and economic growth is slowing.\n  - These factors expose emerging markets to more severe market stress.\n- Policy recommendations:\n  - If significant capital outflows occur, take steps to ensure orderly market conditions and facilitate smooth portfolio adjustments.\n  - Address domestic vulnerabilities and enhance policy credibility to keep emerging markets resilient."
    },
    {
      "heading": "Euro area",
      "content": "- Findings on corporate debt and banks:\n  - Policy actions have reduced funding pressures on weaker sovereigns and banks, but credit remains hampered by financial fragmentation.\n  - A significant share of corporate debt in stressed economies is owed by companies with weak debt servicing capacity — termed a debt overhang.\n  - Even if financial fragmentation were reversed, a persistent debt overhang would remain, amounting to almost one-fifth of the combined corporate debt of Italy, Portugal, and Spain.\n  - The debt overhang affects banks through losses on corporate loans; some banks will need to increase provisioning against expected losses, potentially absorbing a large portion of future bank profits and, in some cases, capital.\n- Policy recommendations and actions:\n  - Address the corporate debt overhang comprehensively — options may include debt clean-ups, improvements to bankruptcy frameworks, or special asset management companies to restructure loans.\n  - Conduct a thorough and transparent review of bank asset quality via planned balance sheet assessment and stress tests by European authorities.\n  - Put credible backstops in place before the exercise is concluded to offset identified shortfalls if private funds are insufficient.\n  - Bolster bank balance sheets in tandem with adequate progress towards banking union."
    },
    {
      "heading": "Japan",
      "content": "- Findings and risks:\n  - Japan is scaling-up monetary stimulus under the Abenomics framework while the U.S. is considering monetary normalization.\n  - Policymakers in Japan need to ensure that the policy package is implemented completely.\n  - A failure to enact the planned fiscal and structural reforms could reignite deflation and intensify financial stability risks.\n- Policy recommendation:\n  - Implement the full set of planned fiscal and structural reforms to reduce risks and support stability."
    },
    {
      "heading": "Moving towards a safer financial system",
      "content": "- Findings:\n  - Progress has been made on regulatory reform, but work remains.\n  - Need to complete the regulatory reform agenda, consistently implement new rules across countries, and enhance supervision.\n  - The system is not yet sufficiently safe; much work remains to be done.\n- Overall assessment:\n  - If the outlined policy challenges are properly managed, the transition towards greater financial stability should be successful and provide a more robust platform for economic growth.\n  - Policymakers need to steer carefully to navigate the bumps in the road ahead to arrive safely at the destination.\n\nSource: Transitions to Financial Stability: A Bumpy Ride, José Viñals, October 9, 2013\n\n---\n\n Content in this bundle\n\n- iMFdirect博客: 过渡到金融稳定状态：坎坷之旅, 2013年10月9日\n  - iMFdirect博客: 过渡到金融稳定状态：坎坷之旅, 2013年10月9日 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - iMFdirect博客: 过渡到金融稳定状态：坎坷之旅, 2013年10月9日 (PDF){rel=\"external\" type=\"application/pdf\"}\n- 金融安定性への移行：平坦でない道のり; ホセ・ビニャルス; iMFdirect ブログ,2013年10月9日掲載\n  - 金融安定性への移行：平坦でない道のり; ホセ・ビニャルス; iMFdirect ブログ,2013年10月9日掲載 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - 金融安定性への移行：平坦でない道のり; ホセ・ビニャルス; iMFdirect ブログ,2013年10月9日掲載 (PDF){rel=\"external\" type=\"application/pdf\"}\n- Full Report\n  - Full Report (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Full Report (PDF){rel=\"external\" type=\"application/pdf\"}\n- Переходные процессы на пути к финансовой стабильности: тернистый путь, Хосе Виньяльс\n  - Переходные процессы на пути к финансовой стабильности: тернистый путь, Хосе Виньяльс (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Переходные процессы на пути к финансовой стабильности: тернистый путь, Хосе Виньяльс (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/blogs/articles/2013/10/09/transitions-to-financial-stability-a-bumpy-ride"
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    "Authors: Jose-Vinals",
    "Published: October 9, 2013",
    "The global financial system faces several major transitions along the road to greater financial stability. These transitions are accompanied by substantial risks.",
    "Five transitions highlighted:",
    "Findings and risks:",
    "Policy recommendations:",
    "Key facts and vulnerabilities:",
    "Policy recommendations:",
    "Findings on corporate debt and banks:",
    "Policy recommendations and actions:",
    "Findings and risks:",
    "Policy recommendation:",
    "Findings:",
    "Overall assessment:",
    "**iMFdirect博客: 过渡到金融稳定状态：坎坷之旅, 2013年10月9日**",
    "**金融安定性への移行：平坦でない道のり; ホセ・ビニャルス; iMFdirect ブログ,2013年10月9日掲載**",
    "**Full Report**",
    "**Переходные процессы на пути к финансовой стабильности: тернистый путь, Хосе Виньяльс**"
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