{ "title": "Transcript of April 2021 Global Financial Stability Report Press Conference", "publication": "IMF News, April 6, 2021", "sourceUrl": "https://www.imf.org/en/news/articles/2021/04/06/tr040621-transcript-of-april-2021global-financial-stability-report-press-conference", "canonical": "https://www.imf.org/en/news/articles/2021/04/06/tr040621-transcript-of-april-2021global-financial-stability-report-press-conference", "overlayPath": "/en/news/articles/2021/04/06/tr040621-transcript-of-april-2021global-financial-stability-report-press-conference/index.md", "summary": "Global economy beginning to emerge from the economic shock caused by the COVID‑19 virus; extraordinary policy measures have eased financial conditions and prevented a deeper downturn.", "publishDate": "2021-04-06", "sections": [ { "heading": "Opening assessment and three priorities", "content": "- Global economy beginning to emerge from the economic shock caused by the COVID‑19 virus; extraordinary policy measures have eased financial conditions and prevented a deeper downturn.\n- Policy tradeoffs: continuing policy support remains necessary, but can have unintended consequences — valuations for risk assets have become stretched and financial vulnerabilities have intensified.\n- Three priorities identified:\n - Addressing corporate sector vulnerabilities and repairing balance sheets.\n - Tightening some macroprudential tools in advanced economies and enhancing supervision and regulation of nonbank financial institutions.\n - Rebuilding buffers in emerging markets to prepare for potential repricing of risk and reversal of capital flows.\n- Central banks: successful financial rescue to date; creativity will be tested as they guide economies through asynchronous recoveries, stretched market valuations, and social strains." }, { "heading": "U.S. interest rates, term premia, and global spillovers", "content": "- Since the summer, yields on the 10‑year U.S. treasury note have more than tripled and are now back to their pre‑pandemic level.\n- Both nominal and real interest rates have risen; nominal yields have risen more, suggesting market‑implied inflation is recovering.\n- Rapid adjustment in rates could generate volatility, tighten global financial conditions, and trigger risk‑off sentiment.\n- Market uncertainty drivers: future path of Treasury supply and central bank asset purchases; rising treasury term premia and market‑implied interest rate volatility.\n- Policy guidance emphasis: need for forward guidance not only on the Federal Funds Rate but also on the future path of asset purchases.\n- Fed monetary framework: average inflation targeting aiming for a temporary inflation overshoot to make up for past misses.\n- Spillover magnitude example: a 1 percentage point increase in U.S. term premia can have up to 1 percentage point increase for emerging market term premia if associated with higher inflation expectations." }, { "heading": "Emerging markets: vulnerabilities, financing needs, and IMF capacity", "content": "- Emerging markets face large external financing needs and slow vaccination rollouts; exposed to rollover risk and higher funding costs as U.S. real yields rise.\n- Earlier in the year, international investor flows into emerging market debt experienced a sudden reversal for several weeks — a change not witnessed since last summer.\n- Market access: many frontier market economies remain impaired.\n- Fiscal support comparisons for 2020:\n - Advanced economies: 15 percent of fiscal support to companies and households.\n - Emerging markets: about half of that, 7 to 8 percent.\n - Sub‑Saharan Africa: only between 1 and 2 percent of fiscal support.\n- IMF stance and capacity:\n - IMF has a large balance sheet and large financing capacities and has provided rapid financing to a very, very large number of countries.\n - IMF stands ready with additional financing to members in need.\n- International community actions: G‑20 Debt Service Suspension Initiative (DSSI) extended to June 30; IMF recommended extension toward end of year; Common Framework for Debt Treatment exists with potential to apply more broadly." }, { "heading": "Corporate sector stress: liquidity, solvency, and policy responses", "content": "- Corporate sector emerging overindebted in many countries with notable differences by firm size and sector.\n- Report provides a decision‑tree to assess whether firms should rely on market financing, seek government support, be restructured, or be liquidated.\n- Liquidity vs solvency:\n - Liquidity stress is high at small firms in more sectors and across countries.\n - Solvency stress is high at small firms and notable at medium‑size and even large firms in the most affected sectors (contact‑intensive: tourism, entertainment, restaurants).\n- Policy responses recommended:\n - Targeted fiscal measures to address liquidity (loan guarantees) and solvency (equity injections).\n - Enhanced, quicker resolution regimes (including out‑of‑court solutions).\n - Timely, holistic, data‑sensitive monitoring to inform unwinding of support and banks’ willingness to lend.\n - Recalibration of support using the decision‑tree framework to prioritize restructuring vs liquidation vs continued support." }, { "heading": "Sub‑Saharan Africa: economic headwinds and policy stance", "content": "- Pandemic hit all countries; Southern Africa reported somewhat lower pandemic numbers but experienced strong economic headwinds from the global economy.\n- Fiscal support in Sub‑Saharan Africa in 2020 estimated at between 1 and 2 percent, versus 7 to 8 percent in emerging markets and 15 percent in advanced economies.\n- Recovery in Sub‑Saharan Africa expected to be slower, increasing asynchronous recovery risks.\n- Monetary policy stance across Sub‑Saharan Africa and emerging markets: accommodative and expected to remain so.\n- Country example: Uganda policy rate lowered to 7 percent and still has positive real policy rates.\n- Capital markets: spreads widened during pandemic peak, recovered somewhat but remain above pre‑pandemic levels; recent hard currency bond issuance resumed after a long pause." }, { "heading": "China: rapid recovery and buildup of vulnerabilities", "content": "- China recovered to pre‑crisis levels in 2020 faster than any other country; recovery accompanied by further increases in leverage and vulnerabilities.\n- Preexisting vulnerabilities: weaknesses in small and provincial banks and leverage in some corporate segments.\n- Policy guidance:\n - Balance supporting the economy with addressing medium‑term buildup of vulnerabilities.\n - Urgent need to unwind implicit guarantees to avoid distortions in spreads and investor perceptions." }, { "heading": "Nonbank financial intermediation, market episodes, and supervisory gaps", "content": "- Recent episodes (bitcoin run‑up, GameStop, Archegos) reflect stretched valuations and episodes of volatility; not necessarily systemic by current assessment but raise concerns.\n- Concerns highlighted:\n - Interaction of stretched valuations and elevated financial leverage increases systemic risk, especially within nonbank financial intermediation.\n - Nonbank sector lacks visibility and comprehensive data; interconnections with banking sector (prime brokerage) can transmit losses.\n- Regulatory and supervisory recommendations:\n - Tighten selected macroprudential tools to tackle pockets of vulnerabilities while avoiding broad tightening of financial conditions.\n - Develop macroprudential tools tailored to nonbank financial intermediation.\n - Expand data collection and disclosure regimes to improve monitoring and early detection.\n - Consider raising buffers elsewhere in the system to ensure resilience and absorb losses.\n- Archegos episode assessment: not systemic at present; manageable by financial institutions given current capital and liquidity, but highlights counterparty risk management and interconnectedness." }, { "heading": "Central bank policy considerations and term premium dynamics", "content": "- Two components of yields: expected future short‑term rates (managed by forward guidance) and term premium (impacted by asset purchases and treasury supply).\n- Rapid, persistent increases in interest rates over narrow windows pose absorption challenges; moderate increases reflecting stronger activity and inflation are healthier.\n- Positive effects of rising rates: improved bank profitability via steeper yield curve; reduced reach‑for‑yield pressure in nonbank sectors.\n- Policy coordination: forward guidance should address both overnight rates and asset purchase paths." }, { "heading": "Cryptocurrencies, distributed ledger technology, and digital currencies", "content": "- Technology revolution in financial sector; DLT and blockchains have applications beyond cryptocurrencies (stablecoins, securities clearing, payments).\n- Benefits: potential for improved payments, lending operations, and broader financial inclusion.\n- Risks: stretched valuations in cryptocurrencies, integrity concerns (law enforcement and misuse), and need to balance innovation with risk mitigation.\n- International work: IMF collaborating with BIS, FSB, central banks, and G‑20 initiatives to improve global cross‑border payments (cheap, accessible, safe)." }, { "heading": "Sustainable finance and ESG market developments", "content": "- Shift in investor sentiment toward ESG (environmental, social, governance) driven by awareness and changing policy frameworks.\n- Architecture needed to scale sustainable finance:\n - High‑quality, consistent, granular, forward‑looking data.\n - Taxonomy convergence or minimal globally accepted taxonomy.\n - Convergent climate‑related sustainability frameworks and linkage to financial variables.\n- Current asset size: rapid growth in ESG‑dedicated assets noted but overall asset class still relatively small; example — whole stock of green sovereign bonds in the euro area amounts for less than 1 percent than the entire outstanding amount.\n\nTranscript of April 2021 Global Financial Stability Report Press Conference — April 6, 2021, IMF Communications Department\n\n---\n\n\n References\n\n- Tobias Adrian\n- Transcripts\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2021/04/06/tr040621-transcript-of-april-2021global-financial-stability-report-press-conference" } ], "bullets": [ "[Markdown version](/en/news/articles/2021/04/06/tr040621-transcript-of-april-2021global-financial-stability-report-press-conference/index.md)", "[Structured JSON version](/en/news/articles/2021/04/06/tr040621-transcript-of-april-2021global-financial-stability-report-press-conference/index.json)", "[Bundle manifest](/en/news/articles/2021/04/06/tr040621-transcript-of-april-2021global-financial-stability-report-press-conference/bundle-manifest.json)", "Published: April 6, 2021", "Global economy beginning to emerge from the economic shock caused by the COVID‑19 virus; extraordinary policy measures have eased financial conditions and prevented a deeper downturn.", "Policy tradeoffs: continuing policy support remains necessary, but can have unintended consequences — valuations for risk assets have become stretched and financial vulnerabilities have intensified.", "Three priorities identified:", "Central banks: successful financial rescue to date; creativity will be tested as they guide economies through asynchronous recoveries, stretched market valuations, and social strains.", "Since the summer, yields on the 10‑year U.S. treasury note have more than tripled and are now back to their pre‑pandemic level.", "Both nominal and real interest rates have risen; nominal yields have risen more, suggesting market‑implied inflation is recovering.", "Rapid adjustment in rates could generate volatility, tighten global financial conditions, and trigger risk‑off sentiment.", "Market uncertainty drivers: future path of Treasury supply and central bank asset purchases; rising treasury term premia and market‑implied interest rate volatility.", "Policy guidance emphasis: need for forward guidance not only on the Federal Funds Rate but also on the future path of asset purchases.", "Fed monetary framework: average inflation targeting aiming for a temporary inflation overshoot to make up for past misses.", "Spillover magnitude example: a 1 percentage point increase in U.S. term premia can have up to 1 percentage point increase for emerging market term premia if associated with higher inflation expectations.", "Emerging markets face large external financing needs and slow vaccination rollouts; exposed to rollover risk and higher funding costs as U.S. real yields rise.", "Earlier in the year, international investor flows into emerging market debt experienced a sudden reversal for several weeks — a change not witnessed since last summer.", "Market access: many frontier market economies remain impaired.", "Fiscal support comparisons for 2020:", "IMF stance and capacity:", "International community actions: G‑20 Debt Service Suspension Initiative (DSSI) extended to June 30; IMF recommended extension toward end of year; Common Framework for Debt Treatment exists with potential to apply more broadly.", "Corporate sector emerging overindebted in many countries with notable differences by firm size and sector.", "Report provides a decision‑tree to assess whether firms should rely on market financing, seek government support, be restructured, or be liquidated.", "Liquidity vs solvency:", "Policy responses recommended:", "Pandemic hit all countries; Southern Africa reported somewhat lower pandemic numbers but experienced strong economic headwinds from the global economy.", "Fiscal support in Sub‑Saharan Africa in 2020 estimated at between 1 and 2 percent, versus 7 to 8 percent in emerging markets and 15 percent in advanced economies.", "Recovery in Sub‑Saharan Africa expected to be slower, increasing asynchronous recovery risks.", "Monetary policy stance across Sub‑Saharan Africa and emerging markets: accommodative and expected to remain so.", "Country example: Uganda policy rate lowered to 7 percent and still has positive real policy rates.", "Capital markets: spreads widened during pandemic peak, recovered somewhat but remain above pre‑pandemic levels; recent hard currency bond issuance resumed after a long pause.", "China recovered to pre‑crisis levels in 2020 faster than any other country; recovery accompanied by further increases in leverage and vulnerabilities.", "Preexisting vulnerabilities: weaknesses in small and provincial banks and leverage in some corporate segments.", "Policy guidance:", "Recent episodes (bitcoin run‑up, GameStop, Archegos) reflect stretched valuations and episodes of volatility; not necessarily systemic by current assessment but raise concerns.", "Concerns highlighted:", "Regulatory and supervisory recommendations:", "Archegos episode assessment: not systemic at present; manageable by financial institutions given current capital and liquidity, but highlights counterparty risk management and interconnectedness.", "Two components of yields: expected future short‑term rates (managed by forward guidance) and term premium (impacted by asset purchases and treasury supply).", "Rapid, persistent increases in interest rates over narrow windows pose absorption challenges; moderate increases reflecting stronger activity and inflation are healthier.", "Positive effects of rising rates: improved bank profitability via steeper yield curve; reduced reach‑for‑yield pressure in nonbank sectors.", "Policy coordination: forward guidance should address both overnight rates and asset purchase paths.", "Technology revolution in financial sector; DLT and blockchains have applications beyond cryptocurrencies (stablecoins, securities clearing, payments).", "Benefits: potential for improved payments, lending operations, and broader financial inclusion.", "Risks: stretched valuations in cryptocurrencies, integrity concerns (law enforcement and misuse), and need to balance innovation with risk mitigation.", "International work: IMF collaborating with BIS, FSB, central banks, and G‑20 initiatives to improve global cross‑border payments (cheap, accessible, safe).", "Shift in investor sentiment toward ESG (environmental, social, governance) driven by awareness and changing policy frameworks.", "Architecture needed to scale sustainable finance:", "Current asset size: rapid growth in ESG‑dedicated assets noted but overall asset class still relatively small; example — whole stock of green sovereign bonds in the euro area amounts for less than 1 percent than the entire outstanding amount.", "[Tobias Adrian](http://www.imf.org/external/np/bio/eng/ta.htm)", "[Transcripts](https://www.imf.org/en/news/searchnews)", "[PRESS CENTER](http://presscenter.imf.org/)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2021/04/06/tr040621-transcript-of-april-2021global-financial-stability-report-press-conference/index.md", "json": "/en/news/articles/2021/04/06/tr040621-transcript-of-april-2021global-financial-stability-report-press-conference/index.json", "bundleManifest": "/en/news/articles/2021/04/06/tr040621-transcript-of-april-2021global-financial-stability-report-press-conference/bundle-manifest.json" }, "generatedAtUtc": "2026-09-26T00:17:58.097Z" }