World Economic and Financial Surveys

Global Financial Stability Report

Market Developments and Issues
April 2004

The Global Financial Stability Report provides semiannual assessments of global financial markets and addresses emerging market financing in a global context.*

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Contents

	Preface

Chapter I.	Overview (495KB pdf file)
Chapter I.	Risks
	More Attention Needed for Structural Issues in Major Financial Centers
	Reallocation of Credit Risk to the Insurance Sector: Impact on Financial Stability
	The Role of Institutional Investors in Emerging Securities Markets
	Policy Conclusions
Chapter II.	Global Financial Market Developments (1005KB pdf file)
Chapter II.	Developments and Vulnerabilities in Mature Markets
	Improved Fundamentals and the Quest for Yield Buoy Emerging Market Bonds
	Surge in Issuance by Emerging Markets Meets Strong Investor Demand
	Banking Sector Developments in Emerging Markets
	Structural Issues Should Be the Focus in Mature Markets
	Appendix I: Determinants of the Rally in Emerging Market Debt—Liquidity and Fundamentals
	Appendix II: Current Status of the Asian Bond Markets and Initiatives References
Chapter III.	Risk Transfer and the Insurance industry (344KB pdf file)
Chapter III.	Market Structure and Regulatory Framework
	Comparison of Different National Systems in the Recent Market Downturn
	Financial Accounting and Rating Agencies
	Policy Conclusions
	Appendix: Regulatory Capital Regimes
	References
Chapter IV.	Institutional Investors in Emerging Markets (335KB pdf file)
Chapter IV.	Mature Market Institutional Investors
	Local Institutional Investors
	Policy Conclusions
	Appendix: Hedge Funds and Recent Emerging Market Currency Crises
	References

Glossary (200KB pdf file)

Annex: Summing Up by the Acting Chair (196KB pdf file)

Statistical Appendix (1143KB pdf file)

Boxes
2.1	The Shift to Tightening: Parallels Between 1994 and 2004
2.2	Bond Market Convergence of EU Accession Countries: Recent Setbacks and Prospects
2.3	Emerging Market Borrowers Improve Debt Structures: Case Studies
2.4	Collective Action Clauses: Update on Market Practice
2.5	State Bank Recapitalization in China
3.1	Credit Derivatives
3.2	EU Solvency II and the United Kingdom's CP 195 Initiative
4.1	The Benefits of Portfolio Diversification: Do They Really Exist?
4.2	The Behavior of Mutual Funds During Periods of Emerging Market Volatility
4.3	Pension Fund Regulations and Local Yield Curves: The Case of Mexico
4.4	The Impact of Emerging Market Crises on Insurance Companies

Tables
2.1	Emerging Market Financing
2.2	Individual Countries' Bank Net Asset/Liability Position vis-à-vis BIS Banks as a Ratio of Official Reserves
2.3	Selected Financial Soundness Indicators for Emerging Markets
2.4	Performance of Selected Hedge Fund Strategies
2.5	Results of Estimate
2.6	Size and Structure of the Global Bond Market in 2002
2.7	Structure of Financing in Selected Countries
2.8	Asian Rating Agencies
3.1	Size of Global Financial Markets, 2002
3.2	United States: Financial Market Size
3.3	Euro Area: Financial Market Size
3.4	Japan: Financial Market Size
3.5	United States: Asset Allocation for the Life Insurance Industry
3.6	United Kingdom: Asset Allocation for the Life Insurance Industry
3.7	United Kingdom: Financial Market Size
3.8	Euro Area: Asset Allocation for the Insurance Industry
3.9	Japan: Asset Allocation for the Life Insurance Industry
3.10	Credit Derivatives and Bank Credit
3.11	Global Credit Derivatives Positions by Sectors End-September 2002
3.12	United States and Japan: Comparison of Risk-Based Capital Weightings for Life Insurance Companies
3.13	Risk Weights for Credit Instruments in the United States and Japan
3.14	United States: Comparison of Bond and Equity Returns and Volatility
3.15	Japanese Life Insurers' Investment in Equity and Loans
3.16	United States: Authorized Control Levels
4.1	Mature Markets: Assets Under Management by Institutional Investors
4.2	U.S. International Mutual Funds: Total Net Assets
4.3	Pension Fund Assets
4.4	Pension Funds Portfolio Limits and Actual Asset Allocation, 2001-02
4.5	Assets Under Management by Insurance Companies
4.6	Emerging Market Mutual Funds: Total Net Assets

Figures
2.1	The Real Federal Funds Rate
2.2	U.S. Nominal GDP and 10-Year Treasury Rates
2.3	Inflation-Indexed Bond
2.4	Long-Term Inflation Expectations
2.5	Inflation Expectations Less Current Inflation
2.6	Three-Month LIBOR Futures Strip Curves
2.7	United States and European Corporate Bond Spreads
2.8	Corporate Default Rates
2.9	U.S. Corporate Bond Spreads by Rating
2.10	Selected Equity Market Performance
2.11	Implied Equity Market Option Volatility Indices
2.12	Yen Probability Density Function
2.13	Euro Probability Density Function
2.14	Currency Volatilities
2.15	Hong Kong SAR: HIBOR Versus LIBOR
2.16	Foreign Exchange Reserves of Selected Asian Central Banks
2.17	Foreign Ownership of U.S. Securities
2.18	Returns During 2003 of the EMBI+ and Select Sub-Indices
2.19	Default Probabilities Implied by Five-Year Credit Default Swap Spreads
2.20	Emerging Market Average Credit Quality
2.21	Dispersion of Returns Within the EMBI÷
2.22	Emerging Market Debt: Average Cross-Correlations
2.23	Cumulative Gross Annual Issuance of Bonds, Loans, and Equity
2.24	Quarterly Net Issuance
2.25	Cumulative Gross Annual Issuance of Bonds
2.26	Share of Bond Issues
2.27	Cumulative Gross Annual Issuance of Equity
2.28	Cumulative Gross Annual Issuance of Loans
2.29	Private Flows to Emerging Market Economies
2.30	Geographic Distribution of FDI Flows
2.31	Moody's Financial Strength Index
2.32	Emerging Market Countries: Banking Sector Market Valuation
2.33	United States: Household Net Worth
2.34	United Kingdom: Mortgage Equity Withdrawal
2.35	Japan: Household Net Worth
2.36	United States: Debt to Net Worth Ratio of Nonfinancial Corporations
2.37	United States: Financing Gap of Nonfinancial Corporations
2.38	Euro Area: Nonfinancial Corporations-Financial Situation
2.39	United Kingdom: Nonfinancial Corporations-Financial Situation
2.40	Japan: Corporate Profitability and Indebtedness
2.41	U.S. Commercial Banks: Delinquency Rates
2.42	United States: Mortgage Market and Hedging
2.48	United States: Government Bond Index, Three-Month Return Volatility
2.44	United States: Agency Duration Gaps
2.45	Euro Area: Jumbo Covered Bonds, November 2003
2.46	Euro-Denominated Bond Market: Gross Issuance Volumes, 2003
2.47	European Securitization, Quarterly Issuance
2.48	Parmalat: Credit Default Swap Spread
2.49	U.S.-Based Equity Mutual Funds: Weekly Net Flows
2.50	Cumulative Flows into U.S.-Based Mutual Funds
2.51	Federal Funds Rate and Excess Emerging Market Bond Market Yield over Three-Month LIBOR
2.52	EMBI+ Bond Spreads and the Slope of the U.S. Yield Curve
2.53	EMBI+ Bond Spreads and Equity Market Implied Volatility
2.54	EMBI+ Bond Spreads and Credit Fundamentals
2.55	Deviations of Actual Spreads from Ratings-Based Spreads
2.56	Selected Asian Countries: Outstanding Amounts of Domestic Bonds
2.57	Korea: ABS Issuance and Direct Financing
3.1	Asset Allocation for Life Insurance Industry, 2002
3.2	Total Nonmortgage Credit to Private Nonfarm Sectors
3.3	International Insurance Sector Equity Indices
4.1	Composition of Emerging Market Debt
4.2	Estimated Portfolio Exposures of Hedge Funds and Local Emerging Markets

On this site, the term "country" does 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. Dependent territories of member countries are listed alphabetically followed by a description of the constitutional relationships with their member countries.