• The Global Financial Stability Report (GFSR) is a semiannual report by the International Monetary Fund (IMF) that assesses the stability of global financial markets and emerging-market financing.
• It is released twice per year, in April and October.
• It draws out the financial ramifications of economic imbalances highlighted by the IMF’s World Economic Outlook.
• In addition to assessing the condition of worldwide markets, the GFSR also issues recommendations for central banks, policymakers and others who supervise global financial markets.
• The April 2019 Global Financial Stability Report (GFSR) finds that despite significant variability over the past two quarters, financial conditions remain favourable.
• The latest GFSR introduces a way to quantify vulnerabilities in the financial system, encompassing six sectors: corporates, households, governments, banks, insurance companies, and other financial institutions.
• The report specifically focuses on corporate sector debt in advanced economies, the sovereign–financial sector nexus in the Euro area, China’s financial imbalances, volatile portfolio flows to emerging markets, and downside risks to the housing market.
• However, the short-term risks to global financial stability are still low by historical standards, though they are slightly higher than what was highlighted in October 2018 Global Financial Stability Report . In the medium term, however, risks remain elevated.
• It recommends action by policymakers, including through the clear communication of any changes in their monetary policy outlook, the deployment and expansion of macroprudential tools, the stepping up of measures to repair public and private sector balance sheets, and the strengthening of emerging market resilience to foreign portfolio outflows.
Mains Paper 2 : International
Prelims level : Global Financial Stability Report
Mains level : Read the story