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Global Financial Stability Report
Responding to the Financial Crisis
and Measuring Systemic Risks
April 2009
©2009 International Monetary Fund
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The Global Financial Stability Report provides semiannual assessments of global financial markets and addresses emerging market financing in a global context.*
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View the Full Text of the GFSR (use the free Adobe Acrobat Reader).
| A. Global Financial Stability Map | ||
| B. Global Deleveraging and its Consequences | ||
| C. The Crisis has Engulfed Emerging Markets | ||
| D. The Deteriorating Outlook for Household and Corporate Defaults in Mature Markets and Implications for the Financial System | ||
| E. Stability Risks and the Effectiveness of the Policy Response | ||
| F. Costs of Official Support, Potential Spillovers, and Policy Risks | ||
| Annex 1.1. Global Financial Stability Map: Construction and Methodology | ||
| Annex 1.2. Predicting Private "Other Investment" Flows and Credit Growth in Emerging Markets | ||
| Annex 1.3. Spillovers Between Foreign Banks and Emerging Market Sovereigns | ||
| Annex 1.4. Debt Restructuring in Systemic Crises | ||
| Annex 1.5. Methodology for Estimating Financial Writedowns | ||
| References | ||
| Four Methods of Assessing Systemic Linkages | ||
| How Regulators Assess Systemic Linkages | ||
| Policy Reflections | ||
| Annex 2.1. Default Intensity Model Estimation | ||
| References |
| What Constitutes "Systemic" Risk? | ||
| "Fundamental" Characteristics of Intervened and Nonintervened Financial Institutions | ||
| Market Perceptions of Risk of Financial Institutions | ||
| Identifying Systemic Risks Through Regime Shifts | ||
| Role of Global Market Conditions During Episodes of Stress | ||
| Policy Implications | ||
| Conclusions | ||
| Annex 3.1. Financial Soundness Indicators | ||
| Annex 3.2. Groups of Selected Financial Institutions | ||
| Annex 3.3. List of Intervened Financial Institutions | ||
| References |
Boxes
| 1.1 | Near-Term Financial Stability Challenges and Policy Priorities | ||
| Data Data |
1.2 | Cross-Border Exposures and Financial Interlinkages within Europe | |
| 1.3 | Effects of the Global Financial Crisis on Trade Finance: The Case of Sub-Saharan Africa | ||
| Data Data |
1.4 | Enhanced IMF Lending Capabilities and Implications for Emerging Markets | |
| Data | 1.5 | Modeling Corporate Bond Spreads: A Capital Flows Framework | |
| Data | 1.6 | Recent Unconventional Measures of Selected Major Central Banks | |
| 1.7 | Forecasts for Charge-Offs on U.S. Bank Loans | ||
| 2.1 | Network Simulations of Credit and Liquidity Shocks | ||
| 2.2 | Quantile Analysis | ||
| 2.3 | Default Intensity Model Specification | ||
| 2.4 | Basics of Over-the-Counter Counterparty Credit Risk Mitigation | ||
| 2.5 | A Central Counterparty as a Mitigant to Counterparty Risk in the Credit Default Swap Markets | ||
| Chart | Data | 3.1 | Modeling Risk-Adjusted Balance Sheets: The Contingent Claims Approach |
| Chart Chart |
Data Data |
3.2 | Option-iPoD Measures of Risk Across Financial Institutions |
| 3.3 | Higher Moments and Multivariate Dependence of Implied Volatilities from Equity Options as Measures of Systemic Risk | ||
| 3.4 | The Consistent Information Multivariate Density Optimizing Approach | ||
| Chart | Data | 3.5 | Spillovers to Emerging Markets: A Multivariate GARCH Analysis |
| Chart Chart |
Data Data |
3.6 | The Transformation of Bank Risk into Sovereign Risk—The Tale of Credit Default Swaps |
| Chart | Data | 1.1 | Macro and Financial Indicators in Selected Emerging Market Countries | ||
| Chart | Data | 1.2 | Potential Writedowns and Capital Needs for Emerging Market Banks by Region | ||
| Chart | Data | 1.3 | Estimates of Financial Sector Potential Writedowns (2007-10) by Geographic Origin of Assets as of April 2009 | ||
| Chart | Data | 1.4 | Bank Equity Requirement Analysis | ||
| Chart | 1.5 | Policy Measures and Effectiveness | |||
| Chart | 1.6 | Tentative Easing in Credit Conditions | |||
| Chart | Data | 1.7 | Bank Wholesale Financing and Public Funding Support | ||
| Chart | Data | 1.8 | Public Debt and Stabilization Costs | ||
| Chart | Data | 1.9 | Mature Market Sovereign Credit Default Swap Spreads and Debt Outstanding | ||
| Chart | Data | 1.10 | Announced Sovereign Guaranteed Bank Debt | ||
| Chart | 1.11 | Changes in Risks and Conditions Since the October 2008 Global Financial Stability Report | |||
| Chart | Data | 1.12 | Distress Dependence Matrices: Sovereigns and Banks | ||
| Chart | Data | 1.13 | Estimated Bank Portfolio Composition by Type of Asset | ||
| Chart | Data | 1.14 | Estimated Bank Portfolio Composition by Origin of Assets | ||
| Chart | Data | 1.15 | Estimated Distribution of Bank Writedowns by Bank Domicile and Cumulative Loss Rates | ||
| 2.1 | Taxonomy of Financial Linkages Models | ||||
| 2.2 | Simulation 1 Results (Credit Channel) | ||||
| 2.3 | Post-Simulation 1 Capital Losses | ||||
| 2.4 | Simulation 2 Results (Credit and Funding Channel) | ||||
| 2.5 | Post-Simulation 2 Capital Losses | ||||
| 2.6 | Conditional Co-Risk Estimates, March 2008 | ||||
| 2.7 | Conditional Co-Risk Estimates, September 2008 | ||||
| 2.8 | Distress Dependence Matrix | ||||
| 2.9 | Summary of Various Methodologies: Limitations and Policy Implications | ||||
| 3.1 | Selected Indicators on Fundamental Characteristics in Financial Institutions | ||||
| 3.2 | Taxonomy of Credit Risk Models | ||||
| 3.3 | Correlations Among 45 Financial Institutions During Different Stress Periods | ||||
| 3.4 | Cluster Analysis | ||||
| 3.5 | Summary of Various Methodologies: Limitations and Policy Implications | ||||
| Data | 1.1 | Global Financial Stability Map | |
| Data | 1.2 | Heat Map: Developments in Systemic Asset Classes | |
| Data | 1.3 | Ratio of Debt to GDP Among Selected Advanced Economies | |
| Data | 1.4 | Bank Credit to the Private Sector | |
| Data | 1.5 | Private Sector Credit Growth | |
| Data | 1.6 | Bank for International Settlements Reporting Banks: Cross-Border Liabilities, Exchange-Rate-Adjusted Changes | |
| Data | 1.7 | Bank for International Settlements Reporting Countries: Cross-Border Assets as a Proportion of Total Assets | |
| Data | 1.8 | Aggregate Emerging Markets Bond Index Global Spread | |
| Data | 1.9 | Net Foreign Equity Investment in Emerging Economies | |
| Data | 1.10 | Emerging Market Hedge Funds: Estimated Assets and Net Asset Flows | |
| Data | 1.11 | Heat Map: Developments in Emerging Market Systemic Asset Classes | |
| Data | 1.12 | Emerging Europe: Real Credit Growth to the Private Sector and Output | |
| Data | 1.13 | Emerging Market Performance of Credit Default Swap Spreads and Equity Prices | |
| Data | 1.14 | Cross-Currency Basis Swap Spreads | |
| Data | 1.15 | Emerging Market Real Credit Growth | |
| Data | 1.16 | External Debt Refinancing Needs | |
| Data | 1.17 | Emerging Market Corporate Bond Spreads | |
| Data | 1.18 | Aggregate Emerging Market Bond Index Global Spread | |
| Data | 1.19 | Distress Dependence between Emerging Market Sovereigns and Advanced Country Banks | |
| Data | 1.20 | U.S. Loan Charge-Off Rates: Baseline | |
| Data | 1.21 | Delinquency Rate of U.S. Residential Mortgage Loans | |
| Data | 1.22 | Spreads on Commercial Mortgage-Backed Securities | |
| Data | 1.23 | Spreads on Consumer Credit Asset-Backed Securities | |
| Data | 1.24 | Global Corporate Default Rates | |
| Data | 1.25 | Average Recovery Rates on Defaulted U.S. Bonds | |
| Data | 1.26 | Corporate Credit Default Swap Spreads | |
| Data | 1.27 | Estimates of Economic Growth and Financial Sector Writedowns | |
| Data | 1.28 | U.S. and European Bank and Insurance Company Market Capitalization, Writedowns, and Capital Infusions | |
| Data | 1.29 | U.S. and European (including U.K.) Bank Earnings and Writedowns | |
| Data | 1.30 | Commercial Bank Loan Charge-Offs | |
| Data | 1.31 | European Securitization Gross Issuance | |
| Data | 1.32 | Refinancing Gap of Global Banks | |
| Data | 1.33 | Pension Funds of Large U.S. and European Companies: Estimated Funding Levels | |
| Data | 1.34 | Insurance Sector Credit Default Swaps Spreads | |
| Data | 1.35 | Large Economy Credit Default Swap Spreads | |
| Data | 1.36 | Benchmark Five-Year Government Bonds | |
| Data | 1.37 | Swap Spreads of Government-Guaranteed Bonds | |
| Data Data Data Data Data |
1.38 | Global Financial Stability Map: Monetary and Financial Conditions | |
| Data Data Data Data |
1.39 | Global Financial Stability Map: Risk Appetite | |
| Data Data Data Data Data Data |
1.40 | Global Financial Stability Map: Macroeconomic Risks | |
| Data Data Data Data Data Data |
1.41 | Global Financial Stability Map: Emerging Market Risks | |
| Data Data Data Data Data Data |
1.42 | Global Financial Stability Map: Credit Risks | |
| Data Data Data Data Data Data |
1.43 | Global Financial Stability Map: Market and Liquidity Risks | |
| Data | 1.44 | Impulse Responses | |
| Data | 1.45 | Net Private Other Investment Flows to Emerging Markets | |
| Data | 1.46 | Emerging Market Real Credit Growth | |
| Data | 1.47 | Emerging Market GDP Growth | |
| Data | 1.48 | Default Probabilities Implied by Credit Default Swap Pricing | |
| Data | 1.49 | Distress Dependence | |
| 2.1 | Network Analysis: A Diagrammatic Representation of Systemic Interbank Exposures | ||
| Chart | Data | 2.2 | Network Analysis: Number of Induced Failures |
| Chart | Data | 2.3 | Network Analysis: Country-by-Country Vulnerability Level |
| 2.4 | Network Analysis: Contagion Path Triggered by the U.K. Failure | ||
| Chart | Data | 2.5 | AIG and Lehman Brothers Default Risk Codependence |
| 2.6 | A Diagrammatic Depiction of Co-Risk Feedbacks | ||
| 2.7 | U.S. and European Banks: Tail-Risk Dependence Devised from Equity Option Implied Volatility, 2006-08 | ||
| 2.8 | Legend of Trivariate Dependence Simplex | ||
| 2.9 | Annual Number of Corporate and Banking Defaults | ||
| 2.10 | Actual and Fitted Economy Default Rates | ||
| 2.11 | Default Rate Probability and Number of Defaults | ||
| 2.12 | Quarterly One-Year-Ahead Forecast Value-at-Risk at 95 Percent Level | ||
| 2.13 | Capital Adequacy Ratios (CAR) After Hypothetical Credit Shocks | ||
| 2.14 | Basic Structure of the Systemic Risk Monitor Model | ||
| 2.15 | RAMSI Framework | ||
| Chart | Data | 3.1 | Capital-to-Assets Ratio |
| Chart | Data | 3.2 | Ratio of Short-Term Debt to Total Debt |
| Chart | Data | 3.3 | Return on Assets |
| 3.4 | Dendrogram | ||
| Chart | Data | 3.5 | U.S. and European Banks: Joint Tail Risk of Implied Volatilities |
| Chart | Data | 3.6 | Higher Moments and Multivariate Dependence of Implied Equity Volatility |
| Chart | Data | 3.7 | Joint Probability of Distress (JPoD) and Banking Stability Index (BSI): Core 2 Group |
| Chart | Data | 3.8 | Joint Probability of Distress (JPoD) and Banking Stability Index (BSI): By Geographic Region |
| Chart | Data | 3.9 | Daily Percentage Change: Joint and Average Probability of Distress, Core 2 Group |
| Chart | Data | 3.10 | Probability of Cascade Effects |
| Chart | Data | 3.11 | Markov-Regime Switching ARCH Model: Joint Probability of Distress and Banking Stability Index |
| Chart | Data | 3.12 | Euro-Dollar Forex Swap |
| Chart | Data | 3.13 | Markov-Switching ARCH Model of VIX |
| Chart | Data | 3.14 | Markov-Switching ARCH Model of TED Spread |
| Chart | Data | 3.15 | Markov-Switching ARCH Model of VIX, TED Spread, and Core 2 Banking Stability Index |
Key Financial Centers
Figures
Emerging Markets
Financial Soundness Indicators
Chart
Data
1.
Major Net Exporters and Importers of Capital in 2008
Chart
Data
2.
Exchange Rates: Selected Major Industrial Countries
Chart
Data
3.
United States: Yields on Corporate and Treasury Bonds
Chart
Data
4.
Selected Spreads
Chart
Data
5.
Nonfinancial Corporate Credit Spreads
Chart
Data
6.
Equity Markets: Price Indexes
Chart
Data
7.
Implied and Historical Volatility in Equity Markets
Chart
Data
8.
Historical Volatility of Government Bond Yields and Bond Returns for Selected Countries
Chart
Data
9.
Twelve-Month Forward Price/Earnings Ratios
Chart
Data
10.
Flows into U.S.-Based Equity Funds
Chart
Data
11.
United States: Corporate Bond Market
Chart
Data
12.
Europe: Corporate Bond Market
Chart
Data
13.
United States: Commercial Paper Market
Chart
Data
14.
United States: Asset-Backed Securities
Data
1.
Global Capital Flows: Inflows and Outflows
Data
2.
Global Capital Flows: Amounts Outstanding and Net Issues of International Debt Securities by Currency of Issue and Signed International Syndicated Credit Facilities by Nationality of Borrower
Data
3.
Selected Indicators on the Size of the Capital Markets, 2007
Data
4.
Global Over-the-Counter Derivatives Markets: Notional Amounts and Gross Market Values of Outstanding Contracts
Data
5.
Global Over-the-Counter Derivatives Markets: Notional Amounts and Gross Market Values of Outstanding Contracts by Counterparty, Remaining Maturity, and Currency
Data
6.
Exchange-Traded Derivative Financial Instruments: Notional Principal Amounts Outstanding and Annual Turnover
Data
7.
United States: Sectoral Balance Sheets
Data
8.
Japan: Sectoral Balance Sheets
Data
9.
Europe: Sectoral Balance Sheets
Chart
Data
15.
Emerging Market Volatility Measures
Chart
Data
16.
Emerging Market Debt Cross-Correlation Measures
Data
10.
Equity Market Indices
Data
11.
Foreign Exchange Rates
Data
12.
Emerging Market Bond Index: EMBI Global Total Returns Index
Data
13.
Emerging Market Bond Index: EMBI Global Yield Spreads
Data
14.
Emerging Market External Financing: Total Bonds, Equities, and Loans
Data
15.
Emerging Market External Financing: Bond Issuance
Data
16.
Emerging Market External Financing: Equity Issuance
Data
17.
Emerging Market External Financing: Loan Syndication
Data
18.
Equity Valuation Measures: Dividend-Yield Ratios
Data
19.
Equity Valuation Measures: Price-to-Book Ratios
Data
20.
Equity Valuation Measures: Price/Earnings Ratios
Data
21.
Emerging Markets: Mutual Fund Flows
Data
22.
Bank Regulatory Capital to Risk-Weighted Assets
Data
23.
Bank Capital to Assets
Data
24.
Bank Nonperforming Loans to Total Loans
Data
25.
Bank Provisions to Nonperforming Loans
Data
26.
Bank Return on Assets
Data
27.
Bank Return on Equity
The following symbols have been used throughout this volume:
. . . to indicate that data are not available;
—— to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist;
- between years or months (for example, 1997-99 or January-June) to indicate the years or months covered, including the beginning and ending years or months;
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"Billion" means a thousand million; "trillion" means a thousand billion.
"Basis points" refer to hundredths of 1 percentage point (for example, 25 basis points are equivalent to 1/4 of 1 percentage point). "n.a." means not applicable.
Minor discrepancies between constituent figures and totals are due to rounding.
As used in this volume the term "country" does not in all cases refer to a territorial entity that is a state as understood by international law and practice. As used here, the term also covers some territorial entities that are not states but for which statistical data are maintained on a separate and independent basis.
On this site, the term "country" does not in all cases refer to a territorial entity that is a state as understood by international law and practice. As used here, the term also covers some territorial entities that are not states. Dependent territories of member countries are listed alphabetically followed by a description of the constitutional relationships with their member countries.
