IMF warns of growing risks to global financial system

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ISLAMABAD (APP) – Financial stability risks have risen amid a moderate and uneven global economic recovery, and are harder to assess and address after they have rotated to parts of the financial system, the International Monetary Fund (IMF) warned.

“Divergent growth and monetary policies have increased tensions in global financial markets and caused rapid and volatile moves in exchange rates and interest rates over the past six months,” Jose Vinals,
director of the IMF’s monetary and capital markets department, said, Khaleej times reported.

“Risks are also rotating away from banks to shadow banks, from solvency to market liquidity risks, and from advanced economies to emerging markets,” Vinals said, adding that five key challenges must be tackled properly to safeguard global financial stability.

The first challenge is to enhance the traction of monetary policies in advanced economies, while managing the undesirable side effects of low interest rates.

“Central bank actions must be complemented with other policies; otherwise monetary policies cannot be fully effective in achieving their aims,” said Vinals. ” What is needed is ‘QE plus other policies’.”

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