Chart of the Week: Brexit and The City

2019-03-25T15:18:50-04:00May 29, 2017|

By IMFBlog

May 29, 2017

It seems likely that Brexit will alter the relationship that UK-based financial firms have with the European Union—even though negotiations are just beginning.

For an idea of how much is at stake for the United Kingdom’s financial services industry, take a look at our Chart of the Week, drawn from the IMF’s latest Global Financial Stability Report. The chart illustrates the linkages that might be affected by the country’s withdrawal from the EU. One example: of the over-the-counter trading in foreign exchange derivatives in the United Kingdom, Germany and France, the UK share comes to 89 percent. […]

Islamic Banking Proposals Get IMF Approval

2019-03-26T12:26:53-04:00February 21, 2017|

By Ghiath Shabsigh, Ross Leckow, and Zeine Zeidane

Versions in:  ArabicFrenchIndonesian, and Malay

Islamic banking, a small but fast-growing corner of the financial world, is receiving greater attention from regulators and policy makers. The IMF recently adopted a set of proposals on Islamic banking and called for a more comprehensive set of policies to ensure financial stability in countries with Islamic banking and support the sound development of the industry. The IMF is now calling for additional work and cooperation by its staff with other international agencies to improve the adoption of relevant standards for Islamic banking and to address remaining regulatory gaps.  […]

China Must Quickly Tackle its Corporate Debt Problems

2019-03-26T14:03:48-04:00December 16, 2016|

By Joong Shik Kang and Wojciech S. Maliszewski

Version in 中文 (Chinese)

China urgently needs to tackle its corporate-debt problem before it becomes a major drag on growth in the world’s No. 2 economy. Corporate debt has reached very high levels and continues to grow. In our recent paper, we recommend that the government act promptly to adopt a comprehensive program that would sacrifice some economic growth in the short term while rapidly returning the economy to a sustainable growth path.

[…]

The ECB’s Negative Rate Policy Has Been Effective but Faces Limits

2019-03-26T16:33:44-04:00August 10, 2016|

By Andy Jobst and Huidan Lin

Versions in Français (French), and Español (Spanish)

More than two years ago, seeking to revive a moribund economy, the European Central Bank (ECB) embarked on a new monetary policy measure: charging interest on excess liquidity that banks held at the central bank. The move complemented a series of other easing measures aimed at bringing inflation back to the ECB’s price stability objective of below, but close to, two percent over the medium term. […]

Sluggish Business Investment in the Euro Area: The Roles of Small and Medium Enterprises and Debt

2019-03-26T16:38:29-04:00August 4, 2016|

By John C. Bluedorn and Christian Ebeke

Small businesses could be the lifeblood of Europe’s economy, but their size and high debt are two of the factors holding back the investment recovery in the euro area. The solution partly lies in policies to help firms grow and reduce debt.

Our new study, part of the IMF’s annual economic health check of the euro area, takes a novel bottom-up look at the problem. We analyze the drivers of investment using a large dataset of over six million observations in eight euro area countries, from 2003 to 2013: Austria, Belgium, Germany, France, Finland, Italy, Portugal, and Spain. […]

Warning Signs as Global Financial Risks Increase

2019-03-27T10:13:21-04:00April 13, 2016|

GFSRBy José Viñals

Versions in عربي (Arabic), 中文 (Chinese), Français (French), 日本語 (Japanese), Русский (Russian), and Español (Spanish)

 

Over the last six months, global financial stability risks increased as a result of the following developments:

  • First, macroeconomic risks have risen, reflecting a weaker and more uncertain outlook for growth and inflation, and more subdued sentiment. These risks were highlighted yesterday at the World Economic Outlook press conference.
  • Second, falling commodity prices and concerns about China’s economy have put pressure on emerging markets and advanced economy credit markets.
  • Finally, confidence in policy traction has slipped, amid concerns about the ability of overburdened monetary policies to offset the impact of higher economic and political risks.

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A New Look at the Benefits and Costs of Bank Capital

2019-03-27T11:30:01-04:00March 3, 2016|

By Jihad Dagher, Giovanni Dell’Ariccia, Luc Laeven, Lev Ratnovski, and Hui Tong

The appropriate level of bank capital and, more generally, a bank’s capacity to absorb losses, has been a contentious subject of discussion since the financial crisis. Larger buffers give bankers “skin in the game” helping to prevent excessive risk taking and absorb losses during crises. But, some argue, they might increase the cost of financial intermediation and slow economic growth.

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Banking on the Government

2017-04-14T01:59:34-04:00June 4, 2014|

By Jesus Gonzalez-Garcia and Francesco Grigoli

(Version in Español)

Government ownership of banks is still common around the world, despite the large number of privatizations that took place over the past four decades as governments reduced their role in the economy. On average, state-owned banks hold 21 percent of the assets of the banking system worldwide. In Latin American and Caribbean countries, the public banks’ share is about 15 percent, with some of them showing very large shares, for instance, Argentina, Brazil, Uruguay, and Costa Rica are all over 40 percent (see Figure 1).

State-owned banks play an important role in the financial system. They fulfill functions that are not performed by private banks, provide financing for projects that benefit the rest of the economy, and provide countercyclical lending (lending more when the economy is weak). But public banks usually respond to the needs of governments owing to the state’s obvious involvement in their administration. As a result, government’s participation in the banking system may weaken fiscal discipline by allowing the public sector to access financing that they would not obtain from other sources.

In our recent study, we use a panel dataset for 123 […]

Financial Crises: Taking Stock

2017-04-14T02:09:48-04:00March 10, 2014|

Stijn ClaessensBy Stijn Claessens

Those who cannot remember the past are condemned to repeat it.

The world has been littered with many financial crises over the centuries, yet many a time these lessons are ignored, and crises recur.  Indeed, there are many clear lessons on the causes of past crises, the severity of their consequences, and how future crises can be prevented or better managed when they occur.

This applies to the 2007-09 global financial crisis that brought colossal disruptions in asset and credit markets, massive erosions of wealth, and unprecedented numbers of bankruptcies.  Six years after the crisis began, its lingering effects are still visible in advanced and emerging markets alike. It is, therefore, a good time to take stock.

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