Sounding the Alarm on Leveraged Lending

2019-03-13T12:03:03-04:00November 15, 2018|

By Tobias Adrian, Fabio Natalucci, and Thomas Piontek

November 15, 2018

A drilling crew member raises a pipe on an oil rig in Texas: Energy is among the industries in which leveraged lending is most prevalent, along with telecommunications, health care, and technology (photo: Nick Oxford/Reuters/Newscom)

We warned in the most recent Global Financial Stability Report that speculative excesses in some financial markets may be approaching a threatening level. […]

Top 5 Blogs on Finance

2019-03-13T14:30:52-04:00September 11, 2018|

By IMFBlog

September 11, 2018

A guard stands outside former US investment bank Lehman brothers (photo: Frances M. Roberts/Newscom)

The tenth anniversary of the collapse of US investment bank Lehman Brothers and the global crisis that followed is a sober reminder of what has changed, and what has not, in the world of economics and finance.  […]

Cloudy With a Chance of Rain—Outlook for Latin America and the Caribbean

2017-04-14T02:15:37-04:00October 16, 2013|

Alejandro WernerBy Alejandro Werner

(Version in Español & Português)

For many Latin American and Caribbean economies, clouds have appeared on the economic horizon. As the global growth momentum shifts from the emerging to the advanced economies, the strength of domestic economic policies will be crucial for how countries can cope with the combination of lower commodity prices and tighter external financing conditions.

Lower commodity prices have already started to affect the region’s commodity exporters. Even though prices remain high by historical standards, countries can no longer count on the tailwind from ever-improving terms of trade, which had propelled economic activity over the past decade.

Meanwhile, longer-term U.S. interest rates have started to rise, with knock-on effects for emerging markets. Across all of the financially integrated economies of Latin America, bond yields have increased, equity prices have fallen, and currencies have depreciated since May, when the U.S. Fed first mentioned the possibility of tapering its bond purchases later this year. Financial conditions remain fairly benign for now, but the strong tailwind from ultra-low external financing costs may also be gone for good.

[…]

Giving Credit Where Credit is Due: How to Design Policies that Work

2017-04-14T02:16:09-04:00October 2, 2013|

Oppers_desk_portraitBy Erik Oppers

What’s up with weak credit? Five years into the economic crisis credit is still barely growing, and even declining in many advanced economies. Weak credit growth is a major factor holding back the economic recovery and governments have tried every policy they can come up with to jumpstart credit. Still, banks don’t seem to want to lend. Or is it the corporate sector and households that can’t afford to borrow? Many feel these policies are not working. What are policymakers to do?

Our analysis in the most recent Global Financial Stability Report tries to shed light on all this darkness to help countries figure out how to make these policies work. It turns out there is no cookie-cutter solution: the problem differs from country to country and changes over time. For example, in a number of euro area countries, a lackluster demand for loans limited credit growth early in the crisis, but then banks became reluctant to supply more loans as the crisis in Europe intensified in 2012.

[…]

Risks to Financial Stability Increase, Bold Action Needed

2017-04-15T14:04:51-04:00July 17, 2012|

The latest update of the Global Financial Stability Report says financial stability risks have increased, because of escalating funding and market pressures and a weak growth outlook. Now is the moment for strong political leadership, because tough decisions will need to be made to restore confidence and ensure lasting financial stability in both advanced and emerging economies. It is time for action.
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