{
  "title": "Mapping the World’s Financial Weak Spots",
  "publication": "IMF Blog, June 20, 2019",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2019/06/20/blog-chart-of-the-week-mapping-the-worlds-financial-weak-spots",
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  "summary": "Where will the next financial crisis come from? The short answer is: We don’t know. We can, however, look for vulnerabilities in the system that, if left untreated, can develop into problems.",
  "sections": [
    {
      "heading": "Overview and purpose",
      "content": "- Where will the next financial crisis come from? The short answer is: We don’t know. We can, however, look for vulnerabilities in the system that, if left untreated, can develop into problems.\n- A vulnerability is defined as \"an area of weakness that can amplify and spread an unexpected economic shock, increasing the level of risk to the financial system.\"\n- Analogy used: imagine the impact of an earthquake on a house built on sand, as opposed to bedrock."
    },
    {
      "heading": "Methodology and scope",
      "content": "- Chart constructed on a five-point scale ranging from lowest (dark green) to highest (red).\n- Chart covers six sectors and five country groups.\n- The chart shows the distribution of vulnerabilities across six sectors in five regions.\n- Constructed using dozens of indicators going back up to two decades.\n- Full details available in the Online Annex to the April 2019 Global Financial Stability Report."
    },
    {
      "heading": "Key findings and elevated vulnerabilities",
      "content": "- Vulnerabilities are elevated in several sectors by historical standards.\n- Government debt in the euro area remains one of the most serious vulnerabilities dogging the global financial system.\n- Government debt vulnerability is also elevated in the United States and many emerging market countries.\n- In advanced economies outside the euro area, household borrowing is high.\n- In China, vulnerabilities are high in several sectors, including nonbank financial institutions.\n- One noted weak spot: the debt level in US corporations and the risks investors in their securities take; \"Lending to heavily indebted companies with weak credit ratings is on the rise and may be a widening crack in the system.\""
    },
    {
      "heading": "Policy implications and recommended steps",
      "content": "- Knowing where vulnerabilities are high or rising can help policy makers take steps to protect their financial systems, as well as the global financial system.\n- Possible steps include:\n  - having banks raise more capital,\n  - reducing levels of public debt,\n  - imposing curbs on borrowing by households or corporations.\n- Data gaps remain an important obstacle to a comprehensive vulnerability analysis and should be filled.\n\nThe Editors, June 20, 2019\n\n---\n\n Content in this bundle\n\n- Global Financial Stability Report April 2019; Online Technical Annex 1.1; April 10, 2019\n  - Global Financial Stability Report April 2019; Online Technical Annex 1.1; April 10, 2019 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Global Financial Stability Report April 2019; Online Technical Annex 1.1; April 10, 2019 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- https://www.imf.org/wp-content/uploads/2019/06/eng-may-29-heatmap2.png\n- Weak spots in Global Financial System Could Amplify Shocks\n- The Financial System is Stronger, but New Vulnerabilities Have Emerged in the Decade\n- Assessing the Risk of the Next Housing Bust\n\nSource: https://www.imf.org/en/blogs/articles/2019/06/20/blog-chart-of-the-week-mapping-the-worlds-financial-weak-spots"
    }
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    "Authors: The Editors",
    "Published: June 20, 2019",
    "Where will the next financial crisis come from? The short answer is: We don’t know. We can, however, look for vulnerabilities in the system that, if left untreated, can develop into problems.",
    "A vulnerability is defined as \"an area of weakness that can amplify and spread an unexpected economic shock, increasing the level of risk to the financial system.\"",
    "Analogy used: imagine the impact of an earthquake on a house built on sand, as opposed to bedrock.",
    "Chart constructed on a five-point scale ranging from lowest (dark green) to highest (red).",
    "Chart covers six sectors and five country groups.",
    "The chart shows the distribution of vulnerabilities across six sectors in five regions.",
    "Constructed using dozens of indicators going back up to two decades.",
    "Full details available in the Online Annex to the April 2019 Global Financial Stability Report.",
    "Vulnerabilities are elevated in several sectors by historical standards.",
    "Government debt in the euro area remains one of the most serious vulnerabilities dogging the global financial system.",
    "Government debt vulnerability is also elevated in the United States and many emerging market countries.",
    "In advanced economies outside the euro area, household borrowing is high.",
    "In China, vulnerabilities are high in several sectors, including nonbank financial institutions.",
    "One noted weak spot: the debt level in US corporations and the risks investors in their securities take; \"Lending to heavily indebted companies with weak credit ratings is on the rise and may be a widening crack in the system.\"",
    "Knowing where vulnerabilities are high or rising can help policy makers take steps to protect their financial systems, as well as the global financial system.",
    "Possible steps include:",
    "Data gaps remain an important obstacle to a comprehensive vulnerability analysis and should be filled.",
    "**Global Financial Stability Report April 2019; Online Technical Annex 1.1; April 10, 2019**",
    "[https://www.imf.org/wp-content/uploads/2019/06/eng-may-29-heatmap2.png](https://www.imf.org/wp-content/uploads/2019/06/eng-may-29-heatmap2.png)",
    "[Weak spots in Global Financial System Could Amplify Shocks](https://blogs.imf.org/2019/04/10/weak-spots-in-global-financial-system-could-amplify-shocks/)",
    "[The Financial System is Stronger, but New Vulnerabilities Have Emerged in the Decade](https://blogs.imf.org/2018/10/09/the-financial-system-is-stronger-but-new-vulnerabilities-have-emerged-in-the-decade-since-the-crisis/)",
    "[Assessing the Risk of the Next Housing Bust](https://blogs.imf.org/2019/04/04/assessing-the-risk-of-the-next-housing-bust/)"
  ],
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