{ "title": "Global Financial Stability Report, April 2021: Preempting a Legacy of Vulnerabilities", "publication": "Global Financial Stability Report, April 2021", "sourceUrl": "https://www.imf.org/en/publications/gfsr/issues/2021/04/06/global-financial-stability-report-april-2021", "canonical": "https://www.imf.org/en/publications/gfsr/issues/2021/04/06/global-financial-stability-report-april-2021", "overlayPath": "/en/publications/gfsr/issues/2021/04/06/global-financial-stability-report-april-2021/index.md", "summary": "Extraordinary policy measures have eased financial conditions and supported the economy, helping to contain financial stability risks. Chapter 1 warns that there is a pressing need to act to avoid a legacy of vulnerabilities while avoiding a broad tightening of financial conditions.", "sections": [ { "heading": "Overview", "content": "- Publication date: April 2021.\n- Central theme: Extraordinary policy measures have eased financial conditions and supported the economy, but there is a pressing need to act to avoid a legacy of vulnerabilities while avoiding a broad tightening of financial conditions.\n- Key cross-cutting risks:\n - Stretched valuations and rising financial vulnerabilities as unintended consequences of pandemic-era actions.\n - An asynchronous and divergent recovery between advanced and emerging market economies.\n - Large external financing needs among several emerging markets, with particular vulnerability if a persistent rise in US rates causes a repricing of risk and tighter financial conditions.\n - Corporate sector overindebtedness in many countries, with notable differences by firm size and sector.\n - Concerns about credit quality of hard-hit borrowers and profitability that are likely to weigh on banks’ risk appetite." }, { "heading": "Chapter 1 — Global Financial Stability Overview: An Asynchronous and Divergent Recovery May Put Financial Stability at Risk", "content": "- Findings:\n - Extraordinary policy measures have eased financial conditions and helped contain financial stability risks.\n - The recovery is expected to be asynchronous and divergent between advanced and emerging market economies.\n - Several emerging markets face challenges due to large external financing needs, especially if a persistent rise in US rates brings about a repricing of risk and tighter financial conditions.\n - The corporate sector in many countries is emerging from the pandemic overindebted, with differences depending on firm size and sector.\n - Concerns about credit quality of hard-hit borrowers and profitability are likely to reduce banks’ risk appetite.\n- Policy emphasis:\n - Ongoing support remains necessary, but authorities must act to avoid a legacy of vulnerabilities while avoiding broad tightening of financial conditions.\n - Support balance sheet repair by strengthening management of nonperforming assets.\n - Rebuild buffers in emerging markets to prepare for a possible repricing of risk and reversal of capital flows." }, { "heading": "Chapter 2 — Nonfinancial Sector: Loose Financial Conditions, Rising Leverage, and Risks to Macro-Financial Stability", "content": "- Findings:\n - Nonfinancial firms and households entered the COVID-19 crisis with historically high levels of leverage, reflecting relatively loose financial conditions since the global financial crisis.\n - Extraordinary policy support cushioned the COVID-19 shock but contributed to a further increase in nonfinancial sector leverage.\n - An easing of financial conditions tends to accelerate leverage buildups, complicating an intertemporal policy trade-off.\n - Loose financial conditions provide a short-term boost to growth but accentuate downside risks to growth in the medium term.\n - The existing high and rapidly building leverage amplifies downside risks to future growth.\n- Policy recommendations:\n - Macroprudential policy can temper leverage buildups and strengthen resilience, mitigating future financial stability risks.\n - While near-term policy support is needed to aid recovery, policymakers should be mindful of increasing macro-financial stability risks and consider early action to tighten selected macroprudential tools to address rising nonfinancial sector vulnerabilities.\n - Develop and deploy macroprudential toolkits for the expanding nonbank financial sector." }, { "heading": "Chapter 3 — Commercial Real Estate: Financial Stability Risks During the COVID-19 Crisis and Beyond", "content": "- Findings:\n - The COVID-19 crisis has hit the commercial real estate sector hard; containment measures reduced demand for commercial property.\n - Some adverse impacts—particularly on retail, office, and hotel segments—could be permanent due to increased virtual activity and potential relocation outside large cities.\n - There is little evidence of large price misalignments at the onset of the pandemic, but signs of overvaluation have emerged in some economies.\n - Misalignments in commercial real estate prices, especially when interacting with other vulnerabilities, increase downside risks to future growth because of the possibility of sharp price corrections.\n - The large size of the commercial real estate sector and its heavy reliance on debt funding suggest potentially significant implications for financial stability.\n- Policy recommendations:\n - Continued policy support remains warranted at the current juncture to keep financial conditions easy and stimulate aggregate demand to aid sector recovery.\n - Recognize that easy financial conditions may contribute to increased financial vulnerabilities and persistent price misalignment.\n - Swiftly deploy targeted macroprudential policy tools to address vulnerabilities in commercial real estate markets.\n - Broaden macroprudential policy coverage to include nonbank financial institutions, which are important in commercial real estate funding markets.\n\nSource: Global Financial Stability Report, April 2021: Preempting a Legacy of Vulnerabilities\n\n---\n\n Content in this bundle\n\n- Dataset overview\n - Dataset overview (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Dataset overview (XLSX){rel=\"external\" type=\"application/vnd.openxmlformats-officedocument.spreadsheetml.sheet\"}\n- dataset overview\n - dataset overview (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - dataset overview (XLSX){rel=\"external\" type=\"application/vnd.openxmlformats-officedocument.spreadsheetml.sheet\"}\n- Dataset overview\n - Dataset overview (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Dataset overview (XLSX){rel=\"external\" type=\"application/vnd.openxmlformats-officedocument.spreadsheetml.sheet\"}\n- Chapter 1\n - Chapter 1 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Chapter 1 (PDF){rel=\"external\" type=\"application/pdf\"}\n- Chapter 1 Online Annex\n - Chapter 1 Online Annex (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Chapter 1 Online Annex (PDF){rel=\"external\" type=\"application/pdf\"}\n- Chapter 2\n - Chapter 2 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Chapter 2 (PDF){rel=\"external\" type=\"application/pdf\"}\n- Chapter 2 Online Annex\n - Chapter 2 Online Annex (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Chapter 2 Online Annex (PDF){rel=\"external\" type=\"application/pdf\"}\n- Chapter 3\n - Chapter 3 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Chapter 3 (PDF){rel=\"external\" type=\"application/pdf\"}\n- Chapter 3 Online Annex\n - Chapter 3 Online Annex (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Chapter 3 Online Annex (PDF){rel=\"external\" type=\"application/pdf\"}\n- Executive Summary\n - Executive Summary (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Executive Summary (PDF){rel=\"external\" type=\"application/pdf\"}\n- Foreword\n - Foreword (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Foreword (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\n---\n\n References\n\n- Sign up to receive free e-mail notices when new series and/or country items are posted on the IMF website.\n- Modify your profile\n- Blog\n- Blog\n- Blog\n\nSource: https://www.imf.org/en/publications/gfsr/issues/2021/04/06/global-financial-stability-report-april-2021" } ], "bullets": [ "[Markdown version](/en/publications/gfsr/issues/2021/04/06/global-financial-stability-report-april-2021/index.md)", "[Structured JSON version](/en/publications/gfsr/issues/2021/04/06/global-financial-stability-report-april-2021/index.json)", "[Bundle manifest](/en/publications/gfsr/issues/2021/04/06/global-financial-stability-report-april-2021/bundle-manifest.json)", "Published: April 6, 2021", "Publication date: April 2021.", "Central theme: Extraordinary policy measures have eased financial conditions and supported the economy, but there is a pressing need to act to avoid a legacy of vulnerabilities while avoiding a broad tightening of financial conditions.", "Key cross-cutting risks:", "Findings:", "Policy emphasis:", "Findings:", "Policy recommendations:", "Findings:", "Policy recommendations:", "**Dataset overview**", "**dataset overview**", "**Dataset overview**", "**Chapter 1**", "**Chapter 1 Online Annex**", "**Chapter 2**", "**Chapter 2 Online Annex**", "**Chapter 3**", "**Chapter 3 Online Annex**", "**Executive Summary**", "**Foreword**", "**Full Report**", "[Sign up to receive free e-mail notices when new series and/or country items are posted on the IMF website.](https://www.imf.org/en/email-subscription/index)", "[Modify your profile](https://www.imf.org/en/email-subscription/login)", "[Blog](https://blogs.imf.org/2021/04/06/an-asynchronous-and-divergent-recovery-may-put-financial-stability-at-risk/)", "[Blog](https://blogs.imf.org/2021/03/29/confronting-the-hazards-of-rising-leverage)", "[Blog](https://blogs.imf.org/2021/03/29/commercial-real-estate-at-a-crossroads)" ], "related": [ { "title": "Dataset overview", "role": "dataset", "sourceUrl": "https://www.imf.org/-/media/files/publications/gfsr/2021/april/data/chapter1-data.xlsx", "summary": { "path": "/-/media/files/publications/gfsr/2021/april/data/chapter1-data.xlsx.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/gfsr/2021/april/data/chapter1-data.xlsx", "mime": 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"chapter", "sourceUrl": "https://www.imf.org/-/media/files/publications/gfsr/2021/april/english/ch1.pdf", "summary": { "path": "/-/media/files/publications/gfsr/2021/april/english/ch1.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/gfsr/2021/april/english/ch1.pdf", "mime": "application/pdf" } }, { "title": "Chapter 1 Online Annex", "role": "online-annex", "sourceUrl": "https://www.imf.org/-/media/files/publications/gfsr/2021/april/english/ch1onlineannex.pdf", "summary": { "path": "/-/media/files/publications/gfsr/2021/april/english/ch1onlineannex.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/gfsr/2021/april/english/ch1onlineannex.pdf", "mime": "application/pdf" } }, { "title": "Chapter 2", "role": "chapter", "sourceUrl": "https://www.imf.org/-/media/files/publications/gfsr/2021/april/english/ch2.pdf", "summary": { "path": "/-/media/files/publications/gfsr/2021/april/english/ch2.pdf.md", "mime": "text/markdown" 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