Global Financial Stability Report
Durable Financial Stability: Getting There from Here
April 2011
Disclaimer: As used in this volume the term “country” does 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.
©2011 International Monetary Fund
Buy a print subscription
Ordering Information
The Global Financial Stability Report provides semiannual assessments of global financial markets and addresses emerging market financing in a global context.*
Disclaimer Copyright and Usage
Full Text
Contents
Summing Up of the Acting Chair
Chapter I. Key Risks and Challenges for Sustaining Financial Stability
Full Text | Video | Boxes | Figures | Tables | Press Points
| A. What Are the Key Stability Risks and Challenges? | ||
| B. Living Dangerously—The Legacy of High Debt Burdens in Advanced Economies | ||
| C. Banking System—Not Enough Has Been Done | ||
| D. Sovereign Funding Challenges | ||
| E. Alleviating Pressures on Households and Firms | ||
| F. Macro and Stability Implications of Capital Inflows into Emerging Markets | ||
| G. Durable Financial Stability: Getting There from Here | ||
| Annex 1.1. What Factors Are Driving U.S. Bond Yields Higher? | ||
| Annex 1.2. Compilation of Investor Base Data for General Government Debt | ||
| Annex 1.3. Dubai: From Debt Overhang to Restructuring, but Risks Remain | ||
| Annex 1.4. Projecting Government Funding Costs through 2015 | ||
| Annex 1.5. Strategic Defaults and Housing Prices in the United States | ||
| Annex 1.6. Recent Measures to Manage Capital Flows in Selected Economies | ||
| Annex 1.7. Exchange-Traded Funds: Mechanics and Risks | ||
| References |
Chapter II. How to Address the Systemic Part of Liquidity Risk
Full Text | Video | Boxes | Figures | Press Points
| Summary | ||
| What Is Systemic Liquidity Risk? | ||
| Will Liquidity Rules Under Basel III Lower Systemic Risk? | ||
| Measures of Systemic Liquidity Risk and Potential Macroprudential Tools to Mitigate It | ||
| Summary and Policy Considerations | ||
| Annex 2.1. Methods Used to Compute a Systemic Liquidity Risk Index | ||
| Annex 2.2. Technical Description of the Systemic Risk-Adjusted Liquidity Model | ||
| Annex 2.3. Highlights of the Stress-Testing Framework References | ||
| References |
Chapter III. Housing Finance and Financial Stability—Back to Basics?
Full Text | Video | Boxes | Figures | Press Points
| Summary | ||
| Housing Booms and Busts—Theory and Stylized Facts | ||
| Global Housing Finance Landscape | ||
| Housing Finance and Financial Stability | ||
| Conclusions and Policy Implications—Back to Basics | ||
| Annex 3.1. The Impact of Housing Finance Modes on House Prices and Loan-Loss Growth during the Recent Crisis | ||
| Annex 3.2. Evidence on House Prices, Credit, and Housing Finance Characteristics in Advanced Economies | ||
| References |
Statistical Appendix (1900 KB pdf file)
Boxes
| 1.1 | The Middle East: Geopolitical Risk to the Financial Stability Outlook | ||
| 1.2 | Implications of Japan’s Earthquake for Financial Stability | ||
| 1.3 | Examining the Ability of U.S. Banks to Absorb Mortgage Principal Reductions | ||
| 1.4 | Are Debt Vulnerabilities Building in the Emerging Market Corporate Sector? | ||
| 1.5 | Emerging Market Banks: Fueling Growth or Frenzy? | ||
| 1.6 | Euro Area Crisis Management and Prevention | ||
| 1.7 | Regulatory Reforms: Are We There Yet? | ||
| Data | 2.1 | How Well Does the Net Stable Funding Ratio Predict Banks' Liquidity Problems? | |
| 2.2 | How Well Does the Systemic Liquidity Risk Index Explain Banks' Liquidity Problems? | ||
| 3.1 | The Danish “Balance Principle” Mortgage Model | ||
| 3.2 | Legal Prerequisites for Housing Finance Systems | ||
| 3.3 | Experience with Limits on Loan-to-Value Ratios for Residential Mortgages | ||
| Data | 3.4 | Housing Finance and the U.S. Housing Crisis | |
| 3.5 | Emerging Market Mortgage Securitization | ||
| 3.6 | Empirical Analyses of the Relationships among House Prices, Credit, and Housing Finance Characteristics | ||
| 3.7 | Mortgage Finance Unbundling and Incentive Misalignments |
Tables
| Data | 1.1 | Sovereign Market and Vulnerability Indicators | |||
| 1.2 | Low-Growth Shock: Impact Analysis and Ranking | ||||
| Data | 1.3 | Low-Growth Shock: Impact Analysis and Ranking | |||
| Data | 1.4 | Low-Growth Shock: Impact Analysis and Ranking | |||
| 1.5 | Low-Growth Shock: Impact Analysis and Ranking | ||||
| 1.6 | Low-Growth Shock: Impact Analysis and Ranking | ||||
| 2.1 | Factors Used in Calculations | ||||
| 2.2 | Main Features of the Proposed Methodologies | ||||
| 2.3 | Indicators for (Systemic) Liquidity Risk Monitoring | ||||
| 2.4 | Joint Expected Losses from Systemic Liquidity Risk | ||||
| 2.5 | Capital Charge for Individual Liquidity Risk and Individual Contribution to Systemic Liquidity Risk | ||||
| 2.6 | Summary Statistics of Individual Contributions to Systemic Liquidity Risk and Associated Fair Value Insurance Premium | ||||
| 2.7 | Selected Liquidity Stress Testing Frameworks | ||||
| 2.8 | Withdrawal Rate Assumptions | ||||
| 2.9 | Probability of Banks Ending the Simulation with a Liquidity Shortage | ||||
| 2.10 | Capital Surcharges | ||||
| 2.11 | Selected Regulatory Proposals for Managing Systemic Liquidity Risk | ||||
| 3.1 | Crisis Measures | ||||
| 3.2 | Housing Finance Features in Advanced Economies, 2008 | ||||
| 3.3 | Housing Finance Systems in Emerging and Newly Industrialized Economies, 2008 | ||||
| 3.4 | Mortgage Market Characteristics in Emerging and Newly Industrialized Economies, 2008 | ||||
| 3.5 | Index of Government Participation in Housing Finance Markets, 2008 | ||||
| 3.6 | Which Housing Finance Features Help Explain Growth in House Prices, Mortgage Credit, and Nonperforming Loans? | ||||
| 3.7 | Joint Determinants of Growth in Real House Prices, Mortgage Credit, and Loan Losses | ||||
| 3.8 | Joint Determinants of Growth in Real House Prices and Mortgage Credit, Pre-Crisis Episode, 2004–07 | ||||
| 3.9 | House Prices and Household Bank Credit | ||||
| 3.10 | House Prices, Household Bank Credit, and Macroeconomic Controls | ||||
| 3.11 | House Prices and Housing Finance Characteristics | ||||
| 3.12 | House Prices and Government Participation | ||||
Figures
| Data | 1.1 | Global Financial Stability Map | |
| Data | 1.2 | Global Financial Stability Map: Assessment of Risks and Conditions | |
| 1.3 | Changes in Financial Conditions | ||
| Data | 1.4 | Risk Appetite | |
| 1.5 | Banking Sector Challenges | ||
| Data | 1.6 | Banking System Capital and Reliance on Wholesale Funding | |
| 1.7 | Global Bank Debt Maturity Profile | ||
| Data | 1.8 | Bank Rollover Requirement, 2011–12 | |
| 1.9 | Bank Debt Yields | ||
| Data | 1.10 | Increase in Bank Deposit Rates | |
| Data | 1.11 | Change in Bank Net Interest Margin, June 2010 | |
| 1.12 | Policy Solutions to Banking Sector Challenges | ||
| 1.13 | European Union Bank Core Tier 1 Ratios, 2010 | ||
| 1.14 | Sovereign Credit Default Swap Spreads | ||
| Data | 1.15 | Euro Area Treasury Bond Spreads over German Bunds, and Volatility | |
| Data | 1.16 | Risk-Adjusted Yields for Euro-Denominated Bonds | |
| Data | 1.17 | Change in General Government Debt Holdings | |
| Data | 1.18 | Average versus Marginal Government Funding Costs | |
| Data | 1.19 | Sovereign Funding Needs | |
| Data | 1.20 | Government Funding Costs in 2015 | |
| 1.21 | Funding Cost Thresholds, Debt, and Revenue | ||
| Data | 1.22 | Leverage Ratios: Household Debt as a Percent of GDP | |
| Data | 1.23 | Various Measures of U.S. Household Leverage | |
| Data | 1.24 | Shadow Inventory of Houses Potentially for Sale | |
| Data | 1.25 | Household Balance Sheets | |
| Data | 1.26 | Federal Reserve Assets and Flows into U.S. Risky Assets | |
| Data | 1.27 | Nonfinancial Corporate Credit Default Swap Spreads | |
| Data | 1.28 | Nonfinancial Corporates’ Debt-to-Equity Ratios | |
| Data | 1.29 | Lending Conditions for Small and Medium-Sized Enterprises | |
| Data | 1.30 | Debt Maturity Profile for the Commercial Real Estate Sector | |
| Data | 1.31 | Net Capital Inflows to Emerging Markets | |
| Data | 1.32 | U.S. Investment Flows in Foreign Securities | |
| 1.33 | Portfolio Debt Inflows and Risk-Adjusted Local Government Yields | ||
| Data | 1.34 | Average Monthly Retail Flows to Emerging Market Debt and Equity Mutual Funds | |
| Data | 1.35 | Capital Inflows, Real Credit, and Real Equity Prices | |
| 1.36 | Emerging Market Equities: Foreign Inflows, Issuance, and Returns in 2010 | ||
| Data | 1.37 | Emerging Market External Corporate Issuance by Rating | |
| 1.38 | Median Volatility of Inflation, Currencies, and Capital Flows | ||
| Data | 1.39 | Real Policy Rates in February 2011 | |
| 1.40 | Ten-Year Government Bond Yields | ||
| 1.41 | Macroeconomic Surprise Indices | ||
| 1.42 | Ten-Year Break-Even Rates | ||
| Data | 1.43 | Term Premium on U.S. Treasuries | |
| Data | 1.44 | Components of 10-Year Nominal Treasury Yield | |
| Data | 1.45 | Dubai: Foreign Borrowing Surge and Rollover Risk | |
| Data | 1.46 | Urban Real Estate Prices, CPI-Deflated | |
| Data | 1.47 | Maturity Profile of Debt of Dubai Government-Related Enterprises | |
| Data | 1.48 | Dubai: Composition of Debt | |
| 1.49 | Credit Default Swap Spreads | ||
| Data | 1.50 | United Arab Emirates: Recent Developments in Local Banks | |
| Data | 1.51 | Nonperforming Loans and Real Estate | |
| Data | 1.52 | Government Funding Costs and Debt Affordability | |
| 1.53 | Annualized Transition Probability of a Performing Prime Mortgage to 60-Plus Day Delinquency Conditional on Local Unemployment Rate | ||
| Data | 1.54 | U.S. Mortgage Delinquency Probability and Home Equity Distribution | |
| Data | 1.55 | Home Equity, Delinquency Rate, and House Price Declines | |
| Data | 1.56 | Indonesia: Foreign Holdings of Government Bonds and Bank Indonesia Certificates | |
| 1.57 | Thailand: Weekly Foreign Portfolio Inflows and Reserves | ||
| Data | 1.58 | Asian Residential Property Prices | |
| Data | 1.59 | Korea: Short-Term External Borrowing | |
| Data | 1.60 | Exchange-Traded Fund Assets ($1.2 Trillion), by Type of Exposure | |
| Data | 1.61 | Exchange-Traded Fund Trading: Synthetic Replication Based on Total Return Swaps | |
| Data | 1.62 | Counterparty Risks in Exchange-Traded Funds | |
| 1.63 | Flash Crash: Intraday Prices, May 6, 2010 | ||
| 1.64 | Gold Exchange-Traded Funds | ||
| Data | 2.1 | Net Stable Funding Ratio by Region | |
| Data | 2.2 | Net Stable Funding Ratio by Business Model | |
| Data | 2.3 | Net Stable Funding Ratio by Bank, 2009 | |
| Data | 2.4 | Systemic Liquidity Risk Index | |
| Data | 2.5 | Average Sensitivity of Volatility of Banks' Return on Equity to Systemic Liquidity Risk Index | |
| Data | 2.6 | Sensitivity of Volatility of Banks’ Return on Equity Based on Market Capitalization to Systemic Liquidity Risk Index | |
| Data | 2.7 | Sensitivity of Volatility of Banks' Return on Equity Based on Net Stable Funding Ratio to Systemic Liquidity Risk Index | |
| Data | 2.8 | Illustration of Individual Expected Losses Arising from Liquidity Risk | |
| Data | 2.9 | Illustration of Joint and Total Expected Shortfalls Arising from Systemic Liquidity Risk | |
| Data | 2.10 | Total Loan Reductions | |
| Data | 2.11 | Principal Component Analysis: Total Variation Explained by Each Factor | |
| 2.12 | Methodology to Compute Systemic Liquidity under the Systemic Risk-Adjusted Liquidity Model | ||
| 2.13 | Conceptual Relation between the Net Stable Funding Ratio at Market Prices and Expected Losses from Liquidity Risk | ||
| 2.14 | Conceptual Scheme for the Probability Distribution of Joint Expected Shortfall from Liquidity Risk: Two-Firm (Bivariate) Case | ||
| 2.15 | Systemic Liquidity Risk ST Framework | ||
| Data | 3.1 | House Price Indices | |
| Data | 3.2 | Government Participation in Housing Finance | |
| Data | 3.3 | Government Participation in Housing Finance: Emerging and Newly Industrialized Economies | |
| Data | 3.4 | Homeownership Rate and Government Participation in Housing Finance | |
| Data | 3.5 | Homeownership Rate | |
| Data | 3.6 | Residential Mortgage-Debt-to-GDP Ratio: Advanced Economies | |
| Data | 3.7 | Residential Mortgage-Debt-to-GDP Ratio: Emerging Europe | |
| Data | 3.8 | Nonperforming Residential Mortgage Loans | |
| Data | 3.9 | Home Foreclosures in the United Kingdom and the United States |
Statistical Appendix
| Data | 1. | Major Net Exporters and Importers of Capital in 2010 |
| 2. | Sovereign Credit Default Swap Spreads | |
| 3. | Selected Credit Default Swap Spreads | |
| Data | 4. | Selected Spreads |
| Data | 5. | Implied Volatility Indices |
| Data | 6. | Twelve-Month Forward Price/Earnings Ratios |
| Data | 7. | United States: Corporate Bond Market |
| Data | 8. | Euro Area: Corporate Bond Market |
| Data | 9. | United States: Commercial Paper Market |
| Data | 1. | Selected Indicators on the Size of the Capital Markets, 2009 |
| Data | 2. | MSCI Equity Market Indices |
| Data | 3. | Emerging Market Bond Index: EMBI Global Yield Spreads |
| Data | 4. | Emerging Market External Financing: Total Bonds, Equities, and Loans |
| Data | 5. | Emerging Market External Financing: Bonds |
| Data | 6. | Emerging Market External Financing: Equities |
| Data | 7. | Emerging Market External Financing: Loans |
| Data | 8. | Equity Valuation Measures: Dividend-Yield Ratios |
| Data | 9. | Equity Valuation Measures: Price/Earnings Ratios |
| Data | 10. | Emerging Markets: Mutual Fund Flows |
| (*)Please note that effective this issue, the IMF’s Statistics Department has assumed responsibility for compiling the Financial Soundness Indicators tables and they are no longer part of this appendix. However, these tables will continue to be linked to the GFSR Statistical Appendix on the IMF’s public website. |
| The following symbols have been used throughout this appendix: . . . to indicate that data are not available; —— to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist; - between years and months (for example, 2008–09 or January–June) to indicate the years or months covered, including the beginning and ending years or months; / between years (for example, 2008/09) to indicate a fiscal or financial year. “Billion” means a thousand million; “trillion” means a thousand billion. “Basis points” refer to hundredths of 1 percentage point (for example, 25 basis points are equivalent to ¼ of 1 percentage point). “n.a.” means not applicable. Minor discrepancies between constituent figures and totals are due to rounding. |
| Disclaimer: As used in this volume the term “country” does 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. |