{ "title": "Transcript of the Global Financial Stability Report Press Conference with Jose Viñals, Financial Counsellor and Director of the Monetary and Capital Markets Department", "publication": "IMF News, September 30, 2009", "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/54/tr093009", "canonical": "https://www.imf.org/en/news/articles/2015/09/28/04/54/tr093009", "overlayPath": "/en/news/articles/2015/09/28/04/54/tr093009/index.md", "summary": "Two factors explain the marked improvement since the Lehman Brothers bankruptcy: unprecedented policy actions and overall improvement in economic prospects.", "publishDate": "2009-09-30", "sections": [ { "heading": "Overall assessment of the global financial system", "content": "- Two factors explain the marked improvement since the Lehman Brothers bankruptcy: unprecedented policy actions and overall improvement in economic prospects.\n- Systemic risk in mature economies has been reduced by liquidity injections, bank balance sheet stabilization, and restoration of credit market functioning.\n- Return of stability has lowered the broad estimate of global write-downs for banks and nonbank financial institutions to roughly $3.4 trillion, which is around $600 billion lower than the last GFSR, largely because of rising security values.\n- Despite stabilization, risks remain and complacency by private sector or policymakers could re-ignite systemic risks and derail the recovery." }, { "heading": "Bank write-downs, capital recognition, and capital needs", "content": "- Improved methodology leads to a revised estimate that about $1.5 trillion in bank write-downs is yet to be recognized, slightly more than the $1.3 trillion acknowledged thus far.\n- Loss recognition has proceeded faster for securities (mark-to-market) than for loans; remaining losses are concentrated in loan books and expected to materialize as the credit cycle advances.\n- Regional recognition differences reflect accounting conventions, reporting frequency, and cycle timing; in the United States a bit more than half of losses have been recognized, while in the Euro Area and Britain a bit less than half have been recognized.\n- Capital positions and earnings have substantially improved and significant capital has been raised, but:\n - If the reference is a capital ratio that regulators consider a minimum, bank balance sheets have been stabilized.\n - If the question is whether banks have enough capital to supply sufficient credit to support the recovery, the answer is no — a substantial need for additional capital remains to support credit supply and guard against future shocks.\n- Indicative additional capital needs by area (as described in the report):\n - United States: a bit above 1 percent of total consolidated assets of the banking system.\n - Euro Area: a little bit more than 1 percent.\n - United Kingdom: a little bit more than 1 percent.\n - Mature Europe (Denmark, Iceland, Norway, Sweden, Switzerland): a bit more than 2 percent.\n- Emphasis on capital conservation: avoid large equity buybacks and dividend payouts while building towards “more and better capital.”" }, { "heading": "Funding profiles and near-term maturities", "content": "- Banks face a “wall of maturities” of around $1.5 trillion of debt over the next 2-3 years.\n- It is vital banks use favorable market conditions to improve funding profiles and reduce potential need for government-backed funding support." }, { "heading": "Credit supply, demand, and fiscal consequences", "content": "- Private sector credit growth continues to contract across major economies due to weak activity and household deleveraging; financing capacity of bank and nonbank sectors remains limited.\n- Total borrowing needs are sustained by burgeoning public sector deficits, causing constrained credit availability.\n- Fiscal risks: a 1 percentage point increase in the deficit relative to GDP increases long-term interest rates by 10-60 basis points, compounding adverse public debt dynamics. Countries with high debt-to-GDP ratios and large contingent liabilities are particularly vulnerable." }, { "heading": "Emerging markets and regional considerations", "content": "- Emerging market conditions have significantly improved: portfolio flows have rebounded; sovereign and corporate debt spreads narrowed; domestic credit conditions generally stabilized.\n- Risks in emerging markets:\n - Emerging market corporates face sizable foreign currency debt refinancing over the next two years.\n - Access for some investment grade borrowers remains restricted.\n - Countries with external/domestic imbalances and heavy reliance on cross-border banking flows remain vulnerable.\n- Asia:\n - China’s domestic credit is growing very fast; IMF flags a risk that rapid credit growth could lead to asset price bubbles if unchecked, though not asserting this is already occurring.\n - Authorities should balance credit growth to support recovery while avoiding financial imbalances; monitor credit quality to prevent future nonperforming loans.\n - Asian banks show low loss rates relative to other regions: they had limited subprime-related exposure and solid liability structures; IMF did not focus on specific capital needs for Asian banks as for Western banks.\n- Central and Eastern Europe:\n - Situation has improved with reasonable amounts of capital and provisions in many banking systems.\n - Concern remains about reduced cross-border bank flows that have not been fully replaced by other capital inflows; corporate refinancing needs are significant and require vigilance.\n- Turkey:\n - Report does not specifically focus on Turkey but notes relative vulnerability in corporate sector refinancing compared with other emerging markets.\n - Strengths cited: strong domestic funding base, low reliance on foreign funding, low exposure to toxic products, and strong capital, profits, and liquidity; central bank actions (rate cuts and liquidity provision) have helped underpin stability." }, { "heading": "Securitization, covered bonds, and restructuring", "content": "- Securitization: report calls for repairing securitization markets to be “simpler, safer and more transparent” — retaining benefits of risk transfer while avoiding past excesses.\n - Required measures include aligned incentives, credit agency oversight, adjusted capital charges, and retention policies (“skin in the game”) designed to promote proper market functioning.\n- Covered bonds: useful funding source where legal frameworks exist and have a track record.\n- Restructuring: fiscal and financial support should include restructuring measures to produce an efficient banking system able to support recovery; Spanish Restructuring Fund cited as an important example for addressing real estate and developer credit exposures." }, { "heading": "Policy recommendations and priorities", "content": "- Four key policy challenges:\n 1. Strengthen bank balance sheets and capital to ensure sufficient credit capacity; address bank balance sheet problems and encourage revival of securitization.\n 2. Manage the delicate balance between maintaining policy interventions and withdrawing support to the financial system — exit strategies must preserve financial stability and be internationally consistent.\n 3. Prudently manage sovereign balance sheets; pursue medium-term fiscal consolidation to avoid crowding out private borrowers or triggering future public debt crises.\n 4. Adopt financial regulatory reforms that minimize likelihood of future crises.\n- If credit capacity is not restored by bank/market adjustments, central banks may need to continue credit and quantitative easing policies to prevent rising interest rates or tightening credit conditions.\n- Emphasize a combination of capital raising, dealing with impaired assets, and capital conservation as complementary actions to restore credit supply." }, { "heading": "Q&A highlights and analytical notes", "content": "- U.K. vulnerability to a funding gap: tension between elevated total credit demand (public plus private) and a deleveraging banking sector that supplies most credit; absent continued authority support, lending rates may rise or credit could be constrained.\n- Lender of last resort issues: cross-border banking interventions have blurred lines between capital support from home governments and host-country central bank support; public interventions have helped keep subsidiaries functioning and providing credit in emerging markets.\n- Stress tests in Europe: EU authorities are conducting stress tests of main banking groups; many EU countries also conduct internal supervisory stress tests; disclosure decisions will involve ECOFIN.\n- Fiscal-to-sovereign-risk linkage: Table on page 33 links financial crisis to sovereign risk sensitivity — countries with high debt burdens and large potential financial-sector liabilities exhibit greater sensitivity of sovereign risk to common shocks (as reflected in widening bank credit default swaps).\n- Impaired assets recognition: slower recognition of loan losses in some regions due to less advanced credit cycle, accounting differences, prevalence of small banks not reporting under IFRS, and lower reporting frequency.\n- Capital needs are also reduced if banks successfully shed problem assets; U.S. banks have been more successful recently in raising capital than European peers.\n\nTranscript of the Global Financial Stability Report press conference, September 30, 2009.\n\n---\n\n\n References\n\n- Spain and the IMF\n- Nigeria and the IMF\n- Republic of Türkiye and the IMF\n- United States and the IMF\n- People's Republic of China and the IMF\n- Transcripts\n- PRESS CENTER\n- Webcast\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/54/tr093009" } ], "bullets": [ "[Markdown version](/en/news/articles/2015/09/28/04/54/tr093009/index.md)", "[Structured JSON version](/en/news/articles/2015/09/28/04/54/tr093009/index.json)", "[Bundle manifest](/en/news/articles/2015/09/28/04/54/tr093009/bundle-manifest.json)", "Published: September 30, 2009", "Two factors explain the marked improvement since the Lehman Brothers bankruptcy: unprecedented policy actions and overall improvement in economic prospects.", "Systemic risk in mature economies has been reduced by liquidity injections, bank balance sheet stabilization, and restoration of credit market functioning.", "Return of stability has lowered the broad estimate of global write-downs for banks and nonbank financial institutions to roughly $3.4 trillion, which is around $600 billion lower than the last GFSR, largely because of rising security values.", "Despite stabilization, risks remain and complacency by private sector or policymakers could re-ignite systemic risks and derail the recovery.", "Improved methodology leads to a revised estimate that about $1.5 trillion in bank write-downs is yet to be recognized, slightly more than the $1.3 trillion acknowledged thus far.", "Loss recognition has proceeded faster for securities (mark-to-market) than for loans; remaining losses are concentrated in loan books and expected to materialize as the credit cycle advances.", "Regional recognition differences reflect accounting conventions, reporting frequency, and cycle timing; in the United States a bit more than half of losses have been recognized, while in the Euro Area and Britain a bit less than half have been recognized.", "Capital positions and earnings have substantially improved and significant capital has been raised, but:", "Indicative additional capital needs by area (as described in the report):", "Emphasis on capital conservation: avoid large equity buybacks and dividend payouts while building towards “more and better capital.”", "Banks face a “wall of maturities” of around $1.5 trillion of debt over the next 2-3 years.", "It is vital banks use favorable market conditions to improve funding profiles and reduce potential need for government-backed funding support.", "Private sector credit growth continues to contract across major economies due to weak activity and household deleveraging; financing capacity of bank and nonbank sectors remains limited.", "Total borrowing needs are sustained by burgeoning public sector deficits, causing constrained credit availability.", "Fiscal risks: a 1 percentage point increase in the deficit relative to GDP increases long-term interest rates by 10-60 basis points, compounding adverse public debt dynamics. Countries with high debt-to-GDP ratios and large contingent liabilities are particularly vulnerable.", "Emerging market conditions have significantly improved: portfolio flows have rebounded; sovereign and corporate debt spreads narrowed; domestic credit conditions generally stabilized.", "Risks in emerging markets:", "Asia:", "Central and Eastern Europe:", "Turkey:", "Securitization: report calls for repairing securitization markets to be “simpler, safer and more transparent” — retaining benefits of risk transfer while avoiding past excesses.", "Covered bonds: useful funding source where legal frameworks exist and have a track record.", "Restructuring: fiscal and financial support should include restructuring measures to produce an efficient banking system able to support recovery; Spanish Restructuring Fund cited as an important example for addressing real estate and developer credit exposures.", "Four key policy challenges:", "If credit capacity is not restored by bank/market adjustments, central banks may need to continue credit and quantitative easing policies to prevent rising interest rates or tightening credit conditions.", "Emphasize a combination of capital raising, dealing with impaired assets, and capital conservation as complementary actions to restore credit supply.", "U.K. vulnerability to a funding gap: tension between elevated total credit demand (public plus private) and a deleveraging banking sector that supplies most credit; absent continued authority support, lending rates may rise or credit could be constrained.", "Lender of last resort issues: cross-border banking interventions have blurred lines between capital support from home governments and host-country central bank support; public interventions have helped keep subsidiaries functioning and providing credit in emerging markets.", "Stress tests in Europe: EU authorities are conducting stress tests of main banking groups; many EU countries also conduct internal supervisory stress tests; disclosure decisions will involve ECOFIN.", "Fiscal-to-sovereign-risk linkage: Table on page 33 links financial crisis to sovereign risk sensitivity — countries with high debt burdens and large potential financial-sector liabilities exhibit greater sensitivity of sovereign risk to common shocks (as reflected in widening bank credit default swaps).", "Impaired assets recognition: slower recognition of loan losses in some regions due to less advanced credit cycle, accounting differences, prevalence of small banks not reporting under IFRS, and lower reporting frequency.", "Capital needs are also reduced if banks successfully shed problem assets; U.S. banks have been more successful recently in raising capital than European peers.", "[Spain and the IMF](http://www.imf.org/external/country/ESP/index.htm)", "[Nigeria and the IMF](http://www.imf.org/external/country/NGA/index.htm)", "[Republic of Türkiye and the IMF](http://www.imf.org/external/country/TUR/index.htm)", "[United States and the IMF](http://www.imf.org/external/country/USA/index.htm)", "[People's Republic of China and the IMF](http://www.imf.org/external/country/CHN/index.htm)", "[Transcripts](https://www.imf.org/en/news/searchnews)", "[PRESS CENTER](http://presscenter.imf.org/)", "[Webcast](https://www.imf.org/external/mmedia/view.asp?eventid=1585)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2015/09/28/04/54/tr093009/index.md", "json": "/en/news/articles/2015/09/28/04/54/tr093009/index.json", "bundleManifest": "/en/news/articles/2015/09/28/04/54/tr093009/bundle-manifest.json" }, "generatedAtUtc": "2026-09-27T13:11:25.759Z" }