WASHINGTON • Risks to the global financial system have risen over the last six months and asset prices remain stretched, the International Monetary Fund (IMF) warned.
Short-term risks to financial stability are still low by historical standards, and financial conditions are relatively loose, especially in the US, the IMF said yesterday in its semi-annual Global Financial Stability Report.
Yet, vulnerabilities from several sectors are high, including among sovereign and corporate borrowers, it said.
The IMF’s report covers an eventful six months for financial markets, which saw a steep sell-off in risk assets at the end of 2018.
Global stocks have bounced back since the start of the year, helping to ease some of the tightening of credit conditions that accompanied the sell-off, the fund noted.
“Given buoyant market sentiment, financial vulnerabilities — such as high leverage and liquidity, maturity and currency mismatches — may continue to build, raising medium-term risks to global financial stability,” the IMF said.
Vulnerabilities are increasing in the US corporate sector and non-bank financial intermediaries, while the impact is more pronounced in the sovereign sector of the euro-area, where government debt is elevated or still rising for some nations, the report said. — Bloomberg