Global Financial Stability Report 2020 - Testbook.com

Understanding the Global Financial Stability Report

The Global Financial Stability Report is a biannual survey conducted by the IMF. The report covers several key topics including:

1. Global Financial Stability
2. Emerging and frontier markets
3. Corporate funding
4. Bank capital
5. Corporate sustainability

Highlights of the Global Financial Stability Report 2020

The October 2020 edition of the Global Financial Stability Report (Bridge to Recovery) covers:

1. Important market developments
2. A future-oriented analysis of banks, NBFCs (Non-banking financial institutions) , and non-financial firms
3. Emerging market capital flows
4. Evaluation of economic policies
5. Impact of the COVID-19 pandemic on economic performance
6. Significance of climate policies and green investment packages to support green recovery and transition to a low-carbon economy

Key Findings of the Global Financial Stability Report (October 2020)

1. The prompt policy response helped to manage near-term global financial stability risks.
2. The nonfinancial corporate sectors are experiencing financial vulnerabilities due to increased debt-borrowing to address cash shortages.
3. Many countries have seen a broadening fiscal deficit.
4. Small and medium-sized enterprises risk insolvency if economic recovery is delayed.
5. Debt-distress poses a challenge for many emerging economies.
6. Focus on post-pandemic financial reform agenda for non-financial sectors includes containing risk-taking in a lower-for-longer interest-rate environment with effective prudential measures.
7. Measures to be taken when the pandemic is under control include gradually withdrawing liquidity support, implementing credit provisions by banks to rebuild capital and liquidity buffers, recapitalization, restructuring or resolving nonviable firms, digitalization, and focusing on green investments.
8. Many emerging market central banks have used asset purchases for the first time to alleviate stress in local bonds and currency markets.
9. The Local Stress Index (LSI), which measures stress in local bonds and currency markets, was released with the Global Financial Stability Report.
10. G7 countries have seen a surge in borrowings in the non-financial corporate sector, supported by unprecedented policy interventions.
11. If the pandemic is prolonged, it could pose risks to banks' capital adequacy.

To learn more about Capital Markets, recapitalization, and other related topics, follow the links below: