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International Monetary Fund. Western Hemisphere Dept.

Abstract

The pandemic continues to spread in Latin America and the Caribbean (LAC), but economic activity is picking up. After a deep contraction in April, activity started recovering in May, as lockdowns were gradually eased, consumers and firms adapted to social distancing, some countries introduced sizable policy support, and global activity strengthened.

International Monetary Fund. Monetary and Capital Markets Department
This technical note on select issues examines different aspects of supervision and oversight in the French financial system. This chapter focuses on the regulatory requirements and supervisory practices that are most relevant to financial stability. In response to Single Supervisory Mechanism initiatives, the French Prudential Supervision and Resolution Authority (ACPR) has sharpened its focus on governance issues, although business model and profitability risk remains the main challenge for the Less Significant Institutions (LSI) sector. The SSM’s commitment to consistent high supervisory standards has shaped the ACPR’s supervisory approach to LSIs in other important ways. Business model and profitability risk remains the main challenge for the LSI sector in France. As noted, earnings have been under pressure due to the persistent low interest rate environment and stiff competition within the banking sector. Similarly, the ACPR’s assessment is that liquidity risk does not pose significant issues for the LSI sector in France.
Mr. Jochen R. Andritzky and Julian Schumacher
Sovereign debt restructurings are perceived as inflicting large losses to bondholders. However, many bonds feature high coupons and often exhibit strong post-crisis recoveries. To account for these aspects, we analyze the long-term returns of sovereign bonds during 32 crises since 1998, taking into account losses from bond exchanges as well as profits before and after such events. We show that the average excess return over risk-free rates in crises with debt restructuring is not significantly lower than the return on bonds in crises without restructuring. Returns differ considerably depending on the investment strategy: Investors who sell during crises fare much worse than buy-and-hold investors or investors entering the market upon signs of distress
Ms. Julianne Ams, Mr. Tamon Asonuma, Mr. Wolfgang Bergthaler, Ms. Chanda M DeLong, Ms. Nouria El Mehdi, Mr. Mark J Flanagan, Mr. Sean Hagan, Ms. Yan Liu, Charlotte J. Lundgren, Mr. Martin Mühleisen, Alex Pienkowski, Mr. Gustavo Pinto, and Mr. Eric Robert

Abstract

“The IMF’s Role in the Prevention and Resolution of Sovereign Debt Crises” provides a guided narrative to the IMF’s policy papers on sovereign debt produced over the last 40 years. The papers are divided into chapters, tracking four historical phases: the 1980s debt crisis; the Mexican crisis and the design of policies to ensure adequate private sector involvement (“creditor bail-in”); the Argentine crisis and the search for a durable crisis resolution framework; and finally, the global financial crisis, the Eurozone crisis, and their aftermaths.

Ms. Julianne Ams, Mr. Tamon Asonuma, Mr. Wolfgang Bergthaler, Ms. Chanda M DeLong, Ms. Nouria El Mehdi, Mr. Mark J Flanagan, Mr. Sean Hagan, Ms. Yan Liu, Charlotte J. Lundgren, Mr. Martin Mühleisen, Alex Pienkowski, Mr. Gustavo Pinto, and Mr. Eric Robert

Abstract

“The IMF’s Role in the Prevention and Resolution of Sovereign Debt Crises” provides a guided narrative to the IMF’s policy papers on sovereign debt produced over the last 40 years. The papers are divided into chapters, tracking four historical phases: the 1980s debt crisis; the Mexican crisis and the design of policies to ensure adequate private sector involvement (“creditor bail-in”); the Argentine crisis and the search for a durable crisis resolution framework; and finally, the global financial crisis, the Eurozone crisis, and their aftermaths.

Mr. Daniel Garcia-Macia
High household wealth is often cited as a key strength of the Italian economy. Both in absolute terms and relative to income, the Italian household sector is wealthier than most euro area peers. A sizable fraction of this wealth is held by the rich and upper middle classes. This paper documents the changes in the Italian household sector’s financial wealth over the past two decades, by constructing the matrix of bilateral financial sectoral exposures. Households became increasingly exposed to the financial sector, which in turn was exposed to the highly indebted real and government sectors. The paper then simulates different financial shocks to gauge the ability of the household sector to absorb losses. Simple illustrative calculations are presented for a fall in the value of government bonds as well as for bank bail-ins versus bailouts.
Ms. Petya Koeva Brooks and Mahmood Pradhan

Abstract

Among member states, many structural weaknesses were exposed when economic performance declined significantly and financial markets became more discerning. This book focuses on the analytical underpinnings of real-time policy advice given to euro area policymakers during four cycles of the IMF’s annual Article IV consultations (2012–15) with euro area authorities.