Global Financial Stability Report, April 2023: Safeguarding Financial Stability amid High Inflation and Geopolitical Risks
Global Financial Stability Report, April 2023
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Bibliographic details
- Published: April 11, 2023
Overview
- Financial stability risks have increased rapidly as the resilience of the global financial system has faced multiple tests.
- Recent turmoil in the banking sector highlights challenges from the interaction between tighter monetary and financial conditions and the buildup in vulnerabilities since the global financial crisis.
- The emergence of stress in financial markets complicates central banks’ tasks while inflationary pressures are proving to be more persistent than anticipated.
- Large emerging markets have so far avoided adverse spillovers, but smaller and riskier economies continue to confront worsening debt sustainability trends.
Chapter 1 — A Financial System Tested by Higher Inflation and Interest Rates
- Analyzes recent turmoil in the banking sector and the interaction between tighter monetary and financial conditions and the buildup in vulnerabilities since the global financial crisis.
- Notes that stress in financial markets complicates central banks’ mandate at a time of more persistent-than-anticipated inflationary pressures.
- Observes that large emerging markets have so far avoided adverse spillovers.
- Finds that smaller and riskier economies continue to confront worsening debt sustainability trends.
Chapter 2 — Nonbank Financial Intermediaries: Vulnerabilities amid Tighter Financial Conditions
- NBFIs play a key role in the global financial system, enhancing access to credit and supporting economic growth.
- Case studies show NBFI stress tends to emerge with:
- elevated leverage,
- liquidity mismatches,
- high levels of interconnectedness that often spill over to emerging markets.
- In the current environment of high inflation and tighter financial conditions, central banks face complex trade-offs during market stress between addressing financial stability risks and achieving price stability objectives.
- Policy tools and recommendations:
- Policymakers need appropriate tools to tackle financial stability consequences of NBFI stress.
- Direct access to central bank liquidity for NBFIs could prove necessary in times of stress, but implementing appropriate guardrails is paramount.
Chapter 3 — Geopolitics and Financial Fragmentation: Implications for Macro‑Financial Stability
- Rising geopolitical tensions among major economies have intensified concerns about global economic and financial fragmentation.
- Fragmentation could affect cross-border allocation of capital, international payment systems, and asset prices.
- Potential macro-financial stability impacts include:
- higher banks’ funding costs,
- reduced bank profitability,
- lower provision of credit to the private sector,
- more limited opportunities for international risk diversification,
- exacerbated capital flow and macro-financial volatility.
- Policy implications and recommendations:
- Policymakers should assess and quantify geopolitical shock transmission to financial institutions.
- Financial institutions may need to hold adequate capital and liquidity buffers against rising geopolitical risks.
- The global financial safety net needs strengthening through:
- adequate levels of international reserves held by countries,
- central bank liquidity swap arrangements,
- precautionary credit lines from international financial institutions.
Media and Release Information
- Report publication month: April 2023.
- Press Briefing: Global Financial Stability Report, April 2023 — April 11, 2023 — 47:03.
- IMF Financial Counsellor Tobias Adrian on the April 2023 Global Financial Stability Report — 3:03.
- The Cost of Fragmentation: Geopolitics and the Impact on the Global Economy in 2023 and Beyond — April 7, 2023 — 1:15:09.
- Nonbank Financial Intermediaries: Vulnerabilities amid Tighter Financial Conditions — April 4, 2023 — 27:42.
Source: Global Financial Stability Report, April 2023 — https://www.imf.org/en/publications/gfsr/issues/2023/04/11/global-financial-stability-report-april-2023
Content in this bundle
- Chapter 1 Data
- Chapter 2 Data
- Chapter 3 Data
- Chapter 1
- CHAPTER 2 NONBANK FINANCIAL INTERMEDIARIES: VULNERABILITIES AMID TIGHTER FINANCIAL CONDITIONS
- Nonbank Financial Intermediaries: Vulnerabilities amid Tighter Financial Conditions
- Chapter 3
- Chapter 3 — Geopolitics and Financial Fragmentation: Implications for Macro-Financial Stability
- Chapter 3 Online Annex
- Executive Summary
- Foreword
- Full Report
- FY23-649800-SM23-Flagship-GFSR-Infographic_040723_v24