Challenges to restoring financial stability remain: IMFApril 21st, 2009 - 9:14 pm ICT by IANS
By Arun Kumar
Washington, April 21 (IANS) Warning that significant challenges to restoring financial stability remain despite an unprecedented policy response to the global economic crisis, the International Monetary Fund (IMF) has called for “continued decisive and effective action” to reinforce signs of market recovery.
Measures including the recent expansion of resources for international institutions and IMF’s enhanced lending framework are gradually beginning to restore market confidence, but the challenges to restoring financial stability remain significant, it said in the Global Financial Stability Report (GFSR) released Tuesday.
“Continued decisive and effective action is needed to preserve and strengthen these first signs of improvement, and to help provide a more stable and resilient platform for sustained global growth,” Jose Vinals, Financial Counsellor and Director of the IMF’s Monetary and Capital Markets Department, said.
“The retrenchment of capital flows is straining economies that have relied on foreign-financed credit growth, while the deteriorating economic environment has increased expected bank writedowns and raised the need for fresh capital in emerging market banks, Vinals told reporters.
In particular, emerging market risks have risen the most in the past six months, the report said. The credit deterioration is taking an increasing toll on bank balance sheets, with the IMF emphasising the need to cleanse them of impaired assets.
As institutions reduce assets during a period of deleveraging, international capital flows to emerging markets have been curtailed, it said noting “the effects have been harsh in some cases. The retrenchment from cross-border markets is outpacing the overall deleveraging process.”
On balance, emerging markets could experience net outflows of private capital in 2009, with but slim chances of recovery in 2010 and 2011.
Banks in countries which were dependent on such cross border flows have suffered greatly, but the effects are also being felt by companies in many emerging market, the report said.
Within emerging markets, eastern European economies have been the hardest hit. The linkages between western Europe and emerging European banking systems make the region particularly vulnerable.
“The global response to date has been rapid, but often piecemeal and insufficient to bolster public confidence,” the IMF said. “In particular, the global banking system needs to be cleansed of its impaired assets.”
“Overall, further decisive and effective policy actions will be needed to stabilise the international financial system,” it said.
- Financial stability improves, but IMF sees fresh challenges - Jan 26, 2010
- Financial stability has improved but new challenges ahead: IMF - Jan 27, 2010
- IMF sees some 'hot spots' in Indian equities markets - Jan 25, 2011
- India's growth projection lowered as global recovery stalls - Jan 24, 2012
- India, Brazil attract largest equity inflows: IMF - Apr 13, 2011
- IMF pares India's growth to 6.1 percent - Jul 16, 2012
- Global financial stability improves, but risks of reversal high: IMF - Sep 30, 2009
- IMF advises caution on policy easing to India - Mar 02, 2012
- IMF urges global financial regulatory reforms - Sep 21, 2011
- Emerging economies spur global recovery: IMF - Feb 24, 2011
- G-20 Summit Declaration - Jun 20, 2012
- Mounting debt poses new threat to global recovery: IMF - Apr 20, 2010
- Protect 'innocent bystanders' from global financial crisis: India (Lead) - Apr 22, 2012
- Emerging economies fail to get greater voice in governance - Oct 10, 2010
- India calls for integrated action to secure growth - Apr 22, 2012
Tags: arun kumar, bank balance, capital flows, effective action, financial counsellor, first signs, global economic crisis, global financial stability, global financial stability report, international institutions, international monetary fund, international monetary fund imf, jose vinals, market confidence, policy response, private capital, recovery measures, resilient platform, retrenchment, slim chances