{ "title": "Global Financial Stability Report, October 2025: Shifting Ground beneath the Calm", "publication": "Global Financial Stability Report, October 2025", "sourceUrl": "https://www.imf.org/en/publications/gfsr/issues/2025/10/14/global-financial-stability-report-october-2025", "canonical": "https://www.imf.org/en/publications/gfsr/issues/2025/10/14/global-financial-stability-report-october-2025", "overlayPath": "/en/publications/gfsr/issues/2025/10/14/global-financial-stability-report-october-2025/index.md", "summary": "

Financial stability risks remain elevated amid risks presented by stretched asset valuations, growing pressure in sovereign bond markets, and the increasing role of nonbank financial institutions.", "sections": [ { "heading": "Elevated Financial Stability Risks — Overview", "content": "- Financial stability risks remain elevated amid stretched asset valuations, growing pressure in sovereign bond markets, and the increasing role of nonbank financial institutions (NBFIs).\n- Markets appear complacent despite shifting ground: valuations have returned to stretched levels since the April 2025 Global Financial Stability Report, and financial conditions have eased.\n- Valuation models show risk asset prices well above fundamentals, raising the risk of sharp corrections.\n- Sovereign bond markets face pressure from widening fiscal deficits.\n- Stress tests reveal greater interconnectedness and maturity mismatches among banks and NBFIs that could amplify shocks.\n- Interacting vulnerabilities: an abrupt decline in asset prices or sharp rise in yields could strain banks’ balance sheets and pressure open-ended funds; greater interconnectedness between banks and NBFIs would intensify transmission of shocks across the financial system." }, { "heading": "Global Foreign Exchange Market — Risks and Mechanisms (Chapter 2)", "content": "- The FX market is the world’s largest and most liquid financial market, driven largely by rising participation of nonbank financial institutions and increased use of derivatives.\n- Episodes of heightened macrofinancial uncertainty affect FX market functioning by:\n - Raising foreign currency funding costs.\n - Widening bid-ask spreads.\n - Amplifying excess exchange rate return volatility.\n- Structural vulnerabilities amplifying FX strains:\n - Significant currency mismatches on balance sheets.\n - Concentrated dealer activity.\n - Elevated participation by nonbank financial institutions.\n- Additional operational and settlement risks:\n - Heightened settlement risks (the possibility that one party will deliver currency without receiving the countervalue).\n - Exposure to operational risks including technical failures and cyberattacks.\n- Spillovers: Stress in FX markets can spill over into other asset classes, tightening overall financial conditions, especially in economies with significant currency mismatches or weaker fiscal positions.\n- Policy mitigation levers:\n - Enhancing surveillance.\n - Ensuring adequate buffers at financial institutions.\n - Strengthening the global financial safety net and operational resilience." }, { "heading": "Emerging Market Sovereign Debt — Changing Landscape (Chapter 3)", "content": "- Context: rising debt levels, heightened vulnerabilities to global shocks, and reduced interest from global investors given lagging performance of emerging market debt.\n- Divergent paths:\n - Major emerging markets: largely able to expand borrowing through increased local issuance to local investors.\n - Other emerging and frontier markets: reliance on shorter maturity financing from domestic banks and the central bank, as well as foreign currency debt.\n- New empirical finding: countries with deeper local investor bases have experienced greater resilience to global shocks over the last 15 years.\n- Risks from local investor reliance:\n - Heavy borrowing.\n - Overreliance on a narrow group of domestic investors, particularly if driven by financial repression.\n- Policy priorities to develop strong and resilient local currency bond markets:\n - Improve macroeconomic fundamentals.\n - Strengthen policy frameworks and robust financial market systems.\n - Develop foundational market infrastructure.\n - Provide legal certainty.\n - Strengthen sovereign debt management practices." }, { "heading": "Policy Priorities and Recommendations (Across Chapters)", "content": "- Preserve central bank operational independence in addressing inflation.\n- Curb government deficits.\n- Advance internationally agreed prudential standards such as Basel 3.\n- Strengthen financial safety nets.\n- Enhance oversight of nonbank financial institutions.\n- Regulate stablecoins effectively.\n- For FX markets: enhance surveillance, ensure adequate buffers, and strengthen operational resilience.\n- For emerging market debt: develop market infrastructure, legal frameworks, and sovereign debt management.\n\nInternational Monetary Fund — Global Financial Stability Report, October 2025\n\n---\n\n Content in this bundle\n\n- Chapter 1 Data\n - Chapter 1 Data (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Chapter 1 Data (XLSX){rel=\"external\" type=\"application/vnd.openxmlformats-officedocument.spreadsheetml.sheet\"}\n- Chapter 2 Data\n - Chapter 2 Data (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Chapter 2 Data (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 Annex\n - Chapter 1 Annex (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Chapter 1 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 Annex\n - Chapter 2 Annex (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Chapter 2 Annex (PDF){rel=\"external\" type=\"application/pdf\"}\n- Risk and Resilience in the Global Foreign Exchange Market — Chapter 2 Summary\n - Risk and Resilience in the Global Foreign Exchange Market — Chapter 2 Summary (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Risk and Resilience in the Global Foreign Exchange Market — Chapter 2 Summary (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 Annex\n - Chapter 3 Annex (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Chapter 3 Annex (PDF){rel=\"external\" type=\"application/pdf\"}\n- Ch3sum\n - Ch3sum (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Ch3sum (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- Global Financial Stability Report, October 2025, \"Shifting Ground beneath the Calm\"\n - Global Financial Stability Report, October 2025, \"Shifting Ground beneath the Calm\" (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Global Financial Stability Report, October 2025, \"Shifting Ground beneath the Calm\" (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- Previous Issues\n- Blog by IMF Financial Counsellor Tobias Adrian\n- Press Conference\n- Replay the Event\n- Read the Blog\n- Replay the Event\n- Read the Blog\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/publications/gfsr/issues/2025/10/14/global-financial-stability-report-october-2025" } ], "bullets": [ "[Markdown version](/en/publications/gfsr/issues/2025/10/14/global-financial-stability-report-october-2025/index.md)", "[Structured JSON version](/en/publications/gfsr/issues/2025/10/14/global-financial-stability-report-october-2025/index.json)", "[Bundle manifest](/en/publications/gfsr/issues/2025/10/14/global-financial-stability-report-october-2025/bundle-manifest.json)", "Published: October 14, 2025", "Financial stability risks remain elevated amid stretched asset valuations, growing pressure in sovereign bond markets, and the increasing role of nonbank financial institutions (NBFIs).", "Markets appear complacent despite shifting ground: valuations have returned to stretched levels since the April 2025 Global Financial Stability Report, and financial conditions have eased.", "Valuation models show risk asset prices well above fundamentals, raising the risk of sharp corrections.", "Sovereign bond markets face pressure from widening fiscal deficits.", "Stress tests reveal greater interconnectedness and maturity mismatches among banks and NBFIs that could amplify shocks.", "Interacting vulnerabilities: an abrupt decline in asset prices or sharp rise in yields could strain banks’ balance sheets and pressure open-ended funds; greater interconnectedness between banks and NBFIs would intensify transmission of shocks across the financial system.", "The FX market is the world’s largest and most liquid financial market, driven largely by rising participation of nonbank financial institutions and increased use of derivatives.", "Episodes of heightened macrofinancial uncertainty affect FX market functioning by:", "Structural vulnerabilities amplifying FX strains:", "Additional operational and settlement risks:", "Spillovers: Stress in FX markets can spill over into other asset classes, tightening overall financial conditions, especially in economies with significant currency mismatches or weaker fiscal positions.", "Policy mitigation levers:", "Context: rising debt levels, heightened vulnerabilities to global shocks, and reduced interest from global investors given lagging performance of emerging market debt.", "Divergent paths:", "New empirical finding: countries with deeper local investor bases have experienced greater resilience to global shocks over the last 15 years.", "Risks from local investor reliance:", "Policy priorities to develop strong and resilient local currency bond markets:", "Preserve central bank operational independence in addressing inflation.", "Curb government deficits.", "Advance internationally agreed prudential standards such as Basel 3.", "Strengthen financial safety nets.", "Enhance oversight of nonbank financial institutions.", "Regulate stablecoins effectively.", "For FX markets: enhance surveillance, ensure adequate buffers, and strengthen operational resilience.", "For emerging market debt: develop market infrastructure, legal frameworks, and sovereign debt management.", "**Chapter 1 Data**", "**Chapter 2 Data**", "**Chapter 1**", "**Chapter 1 Annex**", "**Chapter 2**", "**Chapter 2 Annex**", "**Risk and Resilience in the Global Foreign Exchange Market — Chapter 2 Summary**", "**Chapter 3**", "**Chapter 3 Annex**", "**Ch3sum**", "**Executive Summary**", "**Foreword**", "**Global Financial Stability Report, October 2025, \"Shifting Ground beneath the Calm\"**", "**Full Report**", "[Previous Issues](https://www.imf.org/en/Publications/GFSR)", "[Blog by IMF Financial Counsellor Tobias Adrian](https://www.imf.org/en/blogs/articles/2025/10/14/growth-of-nonbanks-is-revealing-new-financial-stability-risks)", "[Press Conference](https://www.imf.org/en/Videos/view?vid=6382741043112)", "[Replay the Event](https://www.imf.org/en/Videos/view?vid=6382152393112)", "[Read the Blog](https://www.imf.org/en/blogs/articles/2025/10/07/economic-uncertainty-can-test-the-resilience-of-the-foreign-exchange-market)", "[Replay the Event](https://www.imf.org/en/Videos/view?vid=6382100527112)", "[Read the Blog](https://www.imf.org/en/blogs/articles/2025/10/06/good-policies-and-good-luck-helped-emerging-economies-better-resist-shocks)" ], "related": [ { "title": "Chapter 1 Data", "role": "dataset", "sourceUrl": 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