The International Monetary Fund (IMF) published the final version of its Global Financial Stability Report (GFSR) which found that financial stability risks have risen sharply in recent months, as slower economic growth, market turbulence in Europe, and the credit downgrade of the United States have weighed on the global financial system. It added that financial markets have begun to question policymakers’ ability to command broad political support for needed policy actions.
The report outlined both regional and global challenges ahead for the global economy and financial sector. It also argued that banks in the European Union need to continue to build adequate capital buffers to help them cope with the spillovers from riskier governments and need to have stronger balance sheets to support the economic recovery.
Finally, it called for global financial regulatory reforms to be concluded and implemented consistently across countries. This includes the treatment of systemically important financial institutions and market infrastructures, and addressing the challenges posed by the shadow banking sector. “A lack of decisive policy action to fix the causes and legacy of the financial crisis that began in 2008 has led to the current situation. While the path to a sustained recovery has narrowed, it has not disappeared,” it concluded.