Front Matter

Front Matter

International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2015
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    World Economic and Financial Surveys

    Global Financial Stability Report

    October 2015

    Vulnerabilities, Legacies, and Policy Challenges

    Risks Rotating to Emerging Markets

    © 2015 International Monetary Fund

    Cover and Design: Luisa Menjivar and Jorge Salazar

    Composition: AGS

    Cataloging-in-Publication Data

    Joint Bank-Fund Library

    Global financial stability report – Washington, DC : International Monetary Fund, 2002–

    v.; cm. – (World economic and financial surveys, 0258-7440)


    Some issues also have thematic titles.

    ISSN 1729-701X

    1. Capital market—Development countries—Periodicals.

    2. International finance—Periodicals. 3. Economic stabilization—Periodicals. I. International Monetary Fund. II. Series: World economic and financial surveys. HG4523.G563

    ISBN 978-1-51358-204-7 (paper)

    978-1-51351-598-4 (ePub)

    978-1-51354-069-6 (Mobi)

    978-1-51352-166-4 (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 high-lighted 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 21, 2015. 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—Vulnerabilities, Legacies, and Policy Challenges: Risks Rotating to Emerging Markets (Washington, October 2015).

    Please send orders to:

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    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, 2014–15 or January–June) to indicate the years or months covered, including the beginning and ending years or months;

    / between years or months (for example, 2014/15) 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).

    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, despite an improvement in financial stability in advanced economies, risks continue to rotate toward emerging markets. The global financial outlook is clouded by a triad of policy challenges: emerging market vulnerabilities, legacy issues from the crisis in advanced economies, and weak systemic market liquidity. With more vulnerable balance sheets in emerging market companies and banks, firms in these countries are more susceptible to financial stress, economic downturn, and capital outflows. Recent market developments such as slumping commodity prices, China’s bursting equity bubble, and pressure on exchange rates underscore these challenges. The prospect of the U.S. Federal Reserve gradually raising interest rates points to an unprecedented adjustment in the global financial system as financial conditions and risk premiums “normalize” from historically low levels alongside rising policy rates and a modest cyclical recovery. The report also examines the factors that influence levels of liquidity in securities markets, as well as the implications of low liquidity. Currently, market liquidity is being supported by benign cyclical conditions. Although it is too early to assess the impact of recent regulatory changes on market liquidity, changes in market structure, such as larger holdings of corporate bonds by mutual funds, appear to have increased the fragility of liquidity. Finally, the report studies the growing level of corporate debt in emerging markets, which quadrupled between 2004 and 2014. The report finds that global drivers have played an increasing role in leverage growth, issuance, and spreads. Moreover, higher leverage has been associated with, on average, rising foreign currency exposures. It also finds that despite weaker balance sheets, firms have managed to issue bonds at better terms as a result of favorable financial conditions.

    The analysis in this report has been coordinated by the Monetary and Capital Markets (MCM) Department under the general direction of José Viñals, Financial Counsellor and 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, Nicolas Arregui, Serkan Arslanalp, Luis Brandão-Marques, Antoine Bouveret, Peter Breuer, John Caparusso, Yingyuan Chen, Martin Čihák, Fabio Cortes, Reinout De Bock, Martin Edmonds, Selim Elekdag, Jennifer Elliott, Michaela Erbenova, Brenda González-Hermosillo, Tryggvi Gudmundsson, Fei Han, Sanjay Hazarika, Geoffrey Heenan, Eija Holttinen, Hibiki Ichiue, Etibar Jafarov, Mustafa Jamal, Bradley Jones, David Jones, William Kerry, Oksana Khadarina, Ayumu Ken Kikkawa, John Kiff, Suchitra Kumarapathy, Raphael Lam, Frederic Lambert, Sheheryar Malik, Win Monroe, Machiko Narita, Evan Papageorgiou, Vladimir Pillonca, Jean Portier, Shaun Roache, Luigi Ruggerone, Christian Saborowski, Luca Sanfilippo, Tsuyoshi Sasaki, Kate Seal, Nobuyasu Sugimoto, Narayan Suryakumar, Shamir Tanna, Laura Valderrama, Constant Verkoren, Francis Vitek, Jeffrey Williams, Kai Yan, and Jinfan Zhang. Magally Bernal, Carol Franco, Juan Rigat, and Adriana Rota were responsible for word processing.

    Joe Procopio from the Communications Department led the editorial team and managed the report’s production with support from from Michael Harrup and Linda Kean and editorial assistance from Lucy Scott Morales, Sherrie Brown, Gregg Forte, Linda Long, Lorraine Coffey, Shannon Mann, EEI Communications, and AGS.

    This particular edition of the GFSR draws in part on a series of discussions with banks, securities firms, asset management companies, hedge funds, standards setters, financial consultants, pension funds, central banks, national treasuries, and academic researchers.

    This GFSR reflects information available as of September 18, 2015. 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 21, 2015. 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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