Front Matter

Front Matter

International Monetary Fund. Monetary and Financial Systems Dept.
Published Date:
October 2017
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    World Economic and Financial Surveys

    Global Financial Stability Report

    October 2017

    Is Growth at Risk?

    ©2017 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 978-1-48430-839-4 (Paper)

    978-1-48432-056-3 (ePub)

    978-1-48432-057-0 (Mobipocket)

    978-1-48432-059-4 (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 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 21, 2017. 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. 2017. Global Financial Stability Report: Is Growth at Risk? Washington, DC, October.

    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, 2016–17 or January–June) to indicate the years or months covered, including the beginning and ending years or months;

    / between years or months (for example, 2016/17) 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.

    The boundaries, colors, denominations, and any other information shown on the maps do not imply, on the part of the International Monetary Fund, any judgment on the legal status of any territory or any endorsement or acceptance of such boundaries.

    Further Information and Data

    This version of the Global Financial Stability Report (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 analysis in this report has been coordinated by the Monetary and Capital Markets (MCM) Department under the general direction of Tobias Adrian, Director. The project has been directed by Peter Dattels and Dong He, both Deputy Directors, as well as by Claudio Raddatz 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, Zohair Alam, Adrian Alter, Sergei Antoshin, Magally Bernal, André Leitão Botelho, Luis Brandão-Marques, Jeroen Brinkhoff, John Caparusso, Sally Chen, Shiyuan Chen, Yingyuan Chen, Charles Cohen, Claudia Cohen, Fabio Cortes, Dimitris Drakopoulos, Kelly Eckhold, Martin Edmonds, Jesse Eiseman, Jennifer Elliott, Aquiles Farias, Alan Xiaochen Feng, Caio Ferreira, Tamas Gaidosch, Rohit Goel, Hideo Hashimoto, Sanjay Hazarika, Dong He, Geoffrey Heenan, Dyna Heng, Paul Hiebert, Henry Hoyle, Nigel Jenkinson, David Jones, Mitsuru Katagiri, Will Kerry, Jad Khallouf, Robin Koepke, Romain Lafarguette, Tak Yan Daniel Law, Feng Li, Yang Li, Peter Lindner, Xiaomeng Lu, Sheheryar Malik, Rebecca McCaughrin, Kei Moriya, Aditya Narain, Machiko Narita, Vladimir Pillonca, Thomas Piontek, Breanne Rajkumar, Mamoon Saeed, Luca Sanfilippo, Jochen Schmittmann, Yves Schüler, Dulani Seneviratne, Juan Solé, Ilan Solot, Yasushi Sugayama, Jay Surti, Narayan Suryakumar, Nico Valckx, Francis Vitek, Changchun Wang, Jeffrey Williams, Christopher Wilson, and Xinze Yao. Magally Bernal, Breanne Rajkumar, and Claudia Cohen were responsible for word processing.

    Gemma Diaz from the Communications Department led the editorial team and managed the report’s production with support from Linda Kean and editorial assistance from Sherrie Brown, Lorraine Coffey, Susan Graham, Lucy Scott Morales, Nancy Morrison, Katy Whipple, AGS, and Vector.

    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 22, 2017. 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, 2017. However, the analysis and policy considerations are those of the IMF staff and should not be attributed to Executive Directors or their national authorities.


    Twice a year, the Global Financial Stability Report (GFSR) assesses the degree to which developments in the financial sector may affect future economic conditions by analyzing macro-financial linkages and then identifies policies to mitigate risks to growth from the financial sector. At the current juncture, investor risk appetite is buoyant globally: since the last report in April, funding conditions have continued to improve, asset return volatility has receded to multiyear lows across markets, and global capital flows have surged. This easing of financial conditions has supported global growth and financial inclusion, with credit being allocated to benefit a broad range of borrowers. These favorable conditions create a window of opportunity to strengthen the financial system that should be seized, since experience has taught us that it is during times of easy financial conditions that vulnerabilities build.

    Chapter 1 of this GFSR documents how the continuation of monetary accommodation in advanced economies—necessary to support activity and boost inflation—is associated with rising asset valuations and higher leverage, and how this environment makes the system more vulnerable to future shocks. Chapter 2 focuses on household leverage, showing that ample credit growth portends benign conditions in the near term but larger downside risks in the medium term—and thus creates an intertemporal tradeoff. Chapter 3 takes this logic a step further and directly links the easing of financial conditions to downside risks to GDP growth. Easy financial conditions fuel growth in the shorter term, but when those conditions are coupled with a buildup in leverage, risks to growth rise in the medium term. In fact, we propose to measure financial stability by a measure of Growth at Risk, defined as the value at risk of future GDP growth as a function of financial vulnerability.

    The analysis in all three chapters underscores that some of the factors that have contributed to recent gains in financial stability could put growth at risk in the medium term in the absence of appropriate policies to address rising financial vulnerabilities. Macroprudential policies, such as those that address underwriting standards, are the primary tool for guarding against future risks to growth from the global financial system. Now is the time to further strengthen that system, particularly by focusing on nonbank institutions, whose vulnerabilities are rising. Macroprudential policies that mitigate the buildup of medium-term risks can also help to better balance monetary policy tradeoffs.

    Whereas vulnerabilities are rising in the nonbank financial system, the safety of the global systemically important banks (GSIBs) has improved significantly. Those banks have more capital and more liquidity and are subject to tighter supervision, thanks to the pivotal reforms undertaken after the 2008 global financial crisis. Yet some GSIBs still struggle to adapt their business models to ensure their continued health and profitability, which is critical if they are to fulfill their primary mandate: lending to the real economy. A review of the unintended consequences of the postcrisis regulatory reforms will likely lead to some streamlining in the implementation of banking regulations, but it is essential that the overall high level of capital and liquidity be preserved, regulatory uncertainty be avoided, and the global financial regulatory reform agenda be completed. Equally essential is continuing international regulatory cooperation.

    Tobias Adrian

    Financial Counsellor

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