Confidence in global financial markets needs to be restored
Thursday, 9 October 2008
FE Report
With financial markets worldwide facing growing turmoil, internationally coherent and decisive policy measures are required to restore confidence in the global financial system, the International Monetary Fund (IMF) says in a new report.
"Failure to do so could usher in a period in which the ongoing deleveraging process becomes increasingly disorderly and costly for the real economy," it said in its Global Financial Stability Report (GFSR), released Tuesday. Financial institutions have been shedding bad assets, reducing borrowing and seeking new capital, but strains on the system intensified dramatically in mid-September following the collapse or near-collapse of several key institutions.
Confidence in financial institutions and markets has been badly shaken by the global credit turmoil that has its roots in the US subprime mortgage market but that has spread globally to other financial sectors. The GFSR said that risks in a number of areas have risen, especially credit risk, and market and liquidity risks.
The latest GFSR examines how credit deterioration has continued to spread to more sectors and countries-from subprime to prime mortgages, and from residential mortgages to consumer credit, commercial real estate, and now to the corporate sector. European countries are also feeling the pain-some of them also had high house prices and overextended borrowers. Emerging markets appear increasingly at risk as well.
With financial markets worldwide facing growing turmoil, internationally coherent and decisive policy measures are required to restore confidence in the global financial system, the International Monetary Fund (IMF) says in a new report.
"Failure to do so could usher in a period in which the ongoing deleveraging process becomes increasingly disorderly and costly for the real economy," it said in its Global Financial Stability Report (GFSR), released Tuesday. Financial institutions have been shedding bad assets, reducing borrowing and seeking new capital, but strains on the system intensified dramatically in mid-September following the collapse or near-collapse of several key institutions.
Confidence in financial institutions and markets has been badly shaken by the global credit turmoil that has its roots in the US subprime mortgage market but that has spread globally to other financial sectors. The GFSR said that risks in a number of areas have risen, especially credit risk, and market and liquidity risks.
The latest GFSR examines how credit deterioration has continued to spread to more sectors and countries-from subprime to prime mortgages, and from residential mortgages to consumer credit, commercial real estate, and now to the corporate sector. European countries are also feeling the pain-some of them also had high house prices and overextended borrowers. Emerging markets appear increasingly at risk as well.