## Global Financial Stability Report, October 2023: Financial and Climate Policies for a High-Interest-Rate Era _Global Financial Stability Report, October 2023_ ## Source details **Canonical URL:** [Global Financial Stability Report, October 2023: Financial and Climate Policies for a High-Interest-Rate Era](https://www.imf.org/en/publications/gfsr/issues/2023/10/10/global-financial-stability-report-october-2023) ## Other formats - [Markdown version](/en/publications/gfsr/issues/2023/10/10/global-financial-stability-report-october-2023/index.md) - [Structured JSON version](/en/publications/gfsr/issues/2023/10/10/global-financial-stability-report-october-2023/index.json) - [Bundle manifest](/en/publications/gfsr/issues/2023/10/10/global-financial-stability-report-october-2023/bundle-manifest.json) ## Bibliographic details - Published: October 10, 2023 --- ### Overall assessment and key highlights - With core inflation still high in many advanced economies, central banks may need to keep monetary policy tighter for longer than is currently priced in markets. - In emerging market economies, progress on lowering inflation appears to be more advanced, though there are discrepancies across regions. - Optimism about a “soft landing” of the global economy has eased financial conditions since the April 2023 Global Financial Stability Report: stock markets have rallied, credit spreads have remained tight, and emerging market currencies have appreciated. - Upside surprises to the inflation outlook would challenge the soft-landing narrative, resulting in a potentially sharp repricing of assets. - Acute stress in the global banking system has subsided, but a weak tail of banks remains in some countries. - The global credit cycle has started to turn as borrowers’ debt repayment capacity diminishes and credit growth slows. - Risks to global growth are skewed to the downside, similar to the assessment in April. *Key deliverables on the page: Full Report, Executive Summary, Foreword, Press Conference, Blog by IMF's Financial Counsellor Tobias Adrian, Chapters and Data, Videos.* ### Chapter 1 — Soft Landing or Abrupt Awakening? - Main finding: Risks to global growth remain skewed to the downside; cracks in the financial system may become worrisome fault lines if the market-expected soft landing does not materialize. - Inflation and monetary policy: - Core inflation still high in many advanced economies; central banks may need to keep policy tighter for longer than priced in markets. - Emerging market economies show more advanced progress on lowering inflation, with regional discrepancies. - Financial market reaction since April 2023: - Stock markets have rallied. - Credit spreads have remained tight. - Emerging market currencies have appreciated. - Risk channel: Upside surprises to inflation could trigger a sharp repricing of assets, testing financial-system resilience. - Ancillary content: Blog by Tobias Adrian; Chapter 1 Data. ### Chapter 2 — A New Look at Global Banking Vulnerabilities - Scope: Fresh assessment of vulnerabilities in a higher-for-longer environment using an enhanced global stress test and newly developed market-based indicators. - Stress-test findings: - The enhanced global stress test uncovers many banks in advanced economies with the potential for significant capital losses, driven by marking-to-market securities and provisioning for loan losses. - Market-based indicators: - Indicators point to a substantial group of smaller banks at risk in the United States. - Risks are increasing in Asia, China, and Europe. - Policy recommendations: - Policy makers should sharpen their risk assessments. - Increase the severity of stress tests. - Increase capital held against interest rate risks. - Banks should ensure they are prepared to access central bank facilities in times of stress. - Ancillary content: Blog by IMF Staff; Online Annexes. ### Chapter 3 — Financial Sector Policies to Unlock Private Climate Finance in EMDEs - Core problem: The private sector will have to cover a major share of the large climate mitigation investment needs in emerging market and developing economies (EMDEs). - Obstacles to private climate finance in EMDEs: - Often low credit rating, limiting the potential investor base. - Climate policies of major banks and insurance companies are not yet aligned with net zero emission targets. - Despite growth in sustainable investment funds, a small share of invested money is dedicated to creating a positive climate impact. - Political hurdles to implementing carbon pricing and EMDE-specific challenges. - Policy mix required: - Structural policies to lower the cost of capital, mobilize domestic financial resources, and improve credit ratings in EMDEs. - Financial sector policies that refocus on creating climate impact and consider EMDE-specific circumstances. - In low-income countries, additional international support and policy initiative will be needed. - The IMF Resilience and Sustainability Facility can support reforms to help create an enabling investment environment and attract private capital. - Ancillary content: Panel Discussion; Chapter 3 Data. ### Multimedia and events listed - IMF Financial Counsellor Tobias Adrian on the October 2023 Global Financial Stability Report — October 10, 2023 — 2:43 - Press Briefing: Global Financial Stability Report, October 2023 — 44:22 - Unlocking Private Climate Finance for Emerging Market and Developing Economies — October 2, 2023 — 1:01:13 *Source: Global Financial Stability Report, October 2023: Financial and Climate Policies for a High-Interest-Rate Era* --- ## Content in this bundle - **Chapter 1 Data** - [Chapter 1 Data (Markdown version)](/-/media/files/publications/gfsr/2023/october/data/ch1data.xlsx.md){rel="alternate" type="text/markdown"} - [Chapter 1 Data (XLSX)](/-/media/files/publications/gfsr/2023/october/data/ch1data.xlsx){rel="external" type="application/vnd.openxmlformats-officedocument.spreadsheetml.sheet"} - **Chapter 3 Data** - [Chapter 3 Data (Markdown version)](/-/media/files/publications/gfsr/2023/october/data/ch3data.xlsx.md){rel="alternate" type="text/markdown"} - [Chapter 3 Data (XLSX)](/-/media/files/publications/gfsr/2023/october/data/ch3data.xlsx){rel="external" type="application/vnd.openxmlformats-officedocument.spreadsheetml.sheet"} - **Chapter 1** - [Chapter 1 (Markdown version)](/-/media/files/publications/gfsr/2023/october/english/ch1.pdf.md){rel="alternate" type="text/markdown"} - [Chapter 1 (PDF)](/-/media/files/publications/gfsr/2023/october/english/ch1.pdf){rel="external" type="application/pdf"} - **Chapter 2** - [Chapter 2 (Markdown version)](/-/media/files/publications/gfsr/2023/october/english/ch2.pdf.md){rel="alternate" type="text/markdown"} - [Chapter 2 (PDF)](/-/media/files/publications/gfsr/2023/october/english/ch2.pdf){rel="external" type="application/pdf"} - **Chapter 2 Online Annex** - [Chapter 2 Online Annex (Markdown version)](/-/media/files/publications/gfsr/2023/october/english/ch2onlineannex.pdf.md){rel="alternate" type="text/markdown"} - [Chapter 2 Online Annex (PDF)](/-/media/files/publications/gfsr/2023/october/english/ch2onlineannex.pdf){rel="external" type="application/pdf"} - **Chapter 3** - [Chapter 3 (Markdown version)](/-/media/files/publications/gfsr/2023/october/english/ch3.pdf.md){rel="alternate" type="text/markdown"} - [Chapter 3 (PDF)](/-/media/files/publications/gfsr/2023/october/english/ch3.pdf){rel="external" type="application/pdf"} - **Chapter 3 Online Annex** - [Chapter 3 Online Annex (Markdown version)](/-/media/files/publications/gfsr/2023/october/english/ch3onlineannex.pdf.md){rel="alternate" type="text/markdown"} - [Chapter 3 Online Annex (PDF)](/-/media/files/publications/gfsr/2023/october/english/ch3onlineannex.pdf){rel="external" type="application/pdf"} - **Executive Summary** - [Executive Summary (Markdown version)](/-/media/files/publications/gfsr/2023/october/english/execsum.pdf.md){rel="alternate" type="text/markdown"} - [Executive Summary (PDF)](/-/media/files/publications/gfsr/2023/october/english/execsum.pdf){rel="external" type="application/pdf"} - **Foreword** - [Foreword (Markdown version)](/-/media/files/publications/gfsr/2023/october/english/foreword.pdf.md){rel="alternate" type="text/markdown"} - [Foreword (PDF)](/-/media/files/publications/gfsr/2023/october/english/foreword.pdf){rel="external" type="application/pdf"} - **GLOBAL FINANCIAL STABILITY REPORT — Key Highlights 2023 OCT — Soft landing or abrupt awakening** - [GLOBAL FINANCIAL STABILITY REPORT — Key Highlights 2023 OCT — Soft landing or abrupt awakening (Markdown version)](/-/media/files/publications/gfsr/2023/october/english/infographic.pdf.md){rel="alternate" type="text/markdown"} - [GLOBAL FINANCIAL STABILITY REPORT — Key Highlights 2023 OCT — Soft landing or abrupt awakening (PDF)](/-/media/files/publications/gfsr/2023/october/english/infographic.pdf){rel="external" type="application/pdf"} - **Full Report** - [Full Report (Markdown version)](/-/media/files/publications/gfsr/2023/october/english/text.pdf.md){rel="alternate" type="text/markdown"} - [Full Report (PDF)](/-/media/files/publications/gfsr/2023/october/english/text.pdf){rel="external" type="application/pdf"} --- ## References - [Press Conference](https://www.imf.org/en/Videos/view?vid=6338781869112) - [Blog by IMF's Financial Counsellor Tobias Adrian](https://www.imf.org/en/Blogs/Articles/2023/10/10/higher-for-longer-interest-rate-environment-is-squeezing-more-borrowers) - [Blog by IMF Staff](https://www.imf.org/en/Blogs/Articles/2023/10/16/new-look-at-global-banks-highlights-risks-from-higher-for-longer-interest-rates) - [Blog by IMF Staff](https://www.imf.org/en/Blogs/Articles/2023/10/02/emerging-economies-need-much-more-private-financing-for-climate-transition) - [Panel Discussion](https://www.imf.org/en/Videos/view?vid=6338267885112) _Source: https://www.imf.org/en/publications/gfsr/issues/2023/10/10/global-financial-stability-report-october-2023_