Front Matter

Front Matter

International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2016
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    World Economic and Financial Surveys

    Global Financial Stability Report

    October 2016

    Fostering Stability in a Low-Growth, Low-Rate Era

    ©2016 International Monetary Fund

    Cover and Design: Luisa Menjivar and Jorge Salazar

    Composition: AGS, An RR Donnelley Company

    Cataloging-in-Publication Data

    Joint Bank-Fund Library

    Names: International Monetary Fund.

    Title: Global financial stability report.

    Other titles: GFSR | World economic and financial surveys, 0258-7440

    Description: Washington, DC : International Monetary Fund, 2002- | Semiannual | Some issues also have thematic titles. | Began with issue for March 2002.

    Subjects: LCSH: Capital market—Statistics—Periodicals. | International finance—Forecasting—Periodicals. |

    Economic stabilization—Periodicals.

    Classification: LCC HG4523.G557

    ISBN 978-1-51355-958-2 (Paper)

    978-1-47553-847-2 (ePub)

    978-1-47553-877-9 (Mobipocket)

    978-1-47553-879-3 (PDF)

    Disclaimer: The Global Financial Stability Report (GFSR) is a survey by the IMF staff published twice a year, in the spring and fall. The report draws out the financial ramifications of economic issues highlighted in the IMF’s World Economic Outlook (WEO). The report was prepared by IMF staff and has benefited from comments and suggestions from Executive Directors following their discussion of the report on September 23, 2016. The views expressed in this publication are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Directors or their national authorities.

    Recommended citation: International Monetary Fund, Global Financial Stability Report—Fostering Stability in a Low-Growth, Low-Rate Era (Washington, October 2016).

    Please send orders to:

    International Monetary Fund, Publications Services

    P.O. Box 92780, Washington, DC 20090, U.S.A.

    Tel.: (202) 623-7430 Fax: (202) 623-7201



    Assumptions and Conventions

    The following conventions are used throughout the Global Financial Stability Report (GFSR):

    … to indicate that data are not available or not applicable;

    —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, 2015–16 or January–June) to indicate the years or months covered, including the beginning and ending years or months;

    / between years or months (for example, 2015/16) to indicate a fiscal or financial year.

    “Billion” means a thousand million.

    “Trillion” means a thousand billion.

    “Basis points” refers to hundredths of 1 percentage point (for example, 25 basis points are equivalent to ¼ of 1 percentage point).

    If no source is listed on tables and figures, data are based on IMF staff estimates or calculations.

    Minor discrepancies between sums of constituent figures and totals shown reflect rounding.

    As used in this report, the terms “country” and “economy” do 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.

    Further Information and Data

    This version of the GFSR is available in full through the IMF eLibrary ( and the IMF website (

    The data and analysis appearing in the GFSR are compiled by the IMF staff at the time of publication. Every effort is made to ensure, but not guarantee, their timeliness, accuracy, and completeness. When errors are discovered, there is a concerted effort to correct them as appropriate and feasible. Corrections and revisions made after publication are incorporated into the electronic editions available from the IMF eLibrary ( and on the IMF website ( All substantive changes are listed in detail in the online tables of contents.

    For details on the terms and conditions for usage of the contents of this publication, please refer to the IMF Copyright and Usage website,


    The Global Financial Stability Report (GFSR) assesses key risks facing the global financial system. In normal times, the report seeks to play a role in preventing crises by highlighting policies that may mitigate systemic risks, thereby contributing to global financial stability and the sustained economic growth of the IMF’s member countries.

    The current report finds that short-term risks to global financial stability have abated since April 2016. The rise of commodity prices from their lows, along with the ongoing adjustments in emerging markets, has supported a recovery in capital flows. In advanced economies, weaker growth has been mitigated by the prospect of further monetary accommodation. Despite this decrease in short-term risk, the report finds that medium-term risks continue to build. The political climate is unsettled in many countries, making it more difficult to tackle legacy problems. Financial institutions in advanced economies face a number of structural and cyclical challenges. Corporate leverage in many emerging market economies remains high and would fall only gradually under the report’s baseline scenario. Policymakers need a more potent and balanced policy mix to deliver a stronger path for growth and financial stability. There is an urgent need to raise global growth, strengthen the foundations of the global financial system, and bolster confidence. The report also examines how the rise of nonbank financing has altered the impact of monetary policy and finds that the fears of a decline in the effectiveness of monetary policy are unfounded. It appears that the transmission of monetary policy is in fact stronger in economies with larger nonbank financial sectors. Finally, the report examines the link between corporate governance, investor protection, and financial stability in emerging market economies. It finds that the improvements over the past two decades have helped bolster the resilience of their financial systems. These benefits strengthen the case for further reform.

    The analysis in this report has been coordinated by the Monetary and Capital Markets (MCM) Department under the general direction of Ratna Sahay, Acting Director. The project has been directed by Peter Dattels and Dong He, both Deputy Directors, as well as by Gaston Gelos and Matthew Jones, both Division Chiefs. It has benefited from comments and suggestions from the senior staff in the MCM Department.

    Individual contributors to the report are Ali Al-Eyd, Adrian Alter, Nicolás Arregui, Mohamed Bakoush, Luis Brandão-Marques, John Caparusso, Stephen Cecchetti, Sally Chen, Yingyuan Chen, Fabio Cortes, Cristina Cuervo, Martin Edmonds, Selim Elekdag, Jennifer Elliott, Michaela Erbenova, Alan Xiaochen Feng, Caio Ferreira, Rohit Goel, Lucyna Gornicka, Xinhao Han, Thomas Harjes, Sanjay Hazarika, Geoffrey Heenan, Dyna Heng, Eija Holttinen, Henry Hoyle, Hibiki Ichiue, Viacheslav Ilin, Mustafa Jamal, Andy Jobst, David Jones, Oksana Khadarina, Tak Yan Daniel Law, Yang Li, Peter Lindner, Nicolás Magud, Sherheryar Malik, Rebecca McCaughrin, Naoko Miake, Win Monroe, Machiko Narita, Evan Papageorgiou, Vladimir Pillonca, Lev Ratnovski, Luca Sanfilippo, Dulani Senevirante, Juan Solé, Ilan Solot, Garence Staraci, Nobuyasu Sugimoto, Narayan Suryakumar, Shamir Tanna, Laura Valderrama, Francis Vitek, Dmitry Yakovlev, Jeffrey Williams, Nicholas Wood, and Rasool Zandvakil. Magally Bernal, Carol Franco, Lilit Makaryan, Juan Rigat, and Adriana Rota were responsible for word processing.

    Gemma Diaz from the Communications Department led the editorial team and managed the report’s production with support from Michael Harrup, Linda Kean, and Joe Procopio, and editorial assistance from Lorraine Coffey, Gregg Forte, Susan Graham, Lucy Scott Morales, Nancy Morrison, Annerose Wambui Waithaka, Katy Whipple,

    AGS (an RR Donnelley Company), and EEI Communications.

    We are thankful to the Research Department at Keefe, Bruyette & Woods (KBW) for insightful discussions and data support relating to the sensitivity of bank earnings to changes in interest rates. This particular issue of the GFSR draws in part on a series of discussions with banks, securities firms, asset management companies, hedge funds, standard setters, financial consultants, pension funds, central banks, national treasuries, and academic researchers.

    This GFSR reflects information available as of September 19, 2016. The report benefited from comments and suggestions from staff in other IMF departments, as well as from Executive Directors following their discussion of the GFSR on September 23, 2016. However, the analysis and policy considerations are those of the contributing staff and should not be attributed to the IMF, its Executive Directors, or their national authorities.

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