Global Financial Stability Report
Market Developments and Issues
April 2007
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.
©2007 International Monetary Fund
Ordering Information
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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View the Full Text of the GFSR (use the free Adobe Acrobat Reader).
Contents
| Preface (93KB pdf file) | ||
| Executive Summary(90KB pdf file) | ||
| Chapter I. Assessing Global Financial Risks | ||
|---|---|---|
| Full Text (616KB pdf file) | Summary | ||
| Global Financial Stability Map | ||
| Deterioration in the U.S. Subprime Mortgage Market—What Are the Spillover Risks? | ||
| What Is Driving the Leveraged Buyout Boom and Does It Pose Stability Risks? | ||
| Implications of Financing of Global Imbalances with Debt Flows | ||
| Emerging Market Risks and Challenges in a Benign External Environment | ||
| Are Global Financial Markets Too Complacent? | ||
| Policies to Mitigate Stability Risks | ||
| Annex 1.1. Implementing the Global Financial Stability Map | ||
| Annex 1.2. Financial Systems in Mature and Emerging Markets | ||
| Annex 1.3. Credit Derivatives and Structured Credit Market Update | ||
| Annex 1.4. Trends and Oversight Developments in the Hedge Fund Industry | ||
| References | ||
| Chapter II. Changes in the International Investor Base and Implications for Financial Stability | ||
| Full Text (336KB pdf file) | Summary | ||
| Asset Accumulation and Implications for Cross-Border Flows | ||
| Asset Allocation Behavior and Implications for Asset Prices | ||
| Financial Stability Implications | ||
| Conclusions and Policy Implications | ||
| References | ||
| Chapter III. The Globalization of Financial Institutions and Its Implication for Financial Stability | ||
| Full Text (308KB pdf file) | Summary | ||
| Background | ||
| How Institutional Globalization Affects Stability | ||
| Policy Implications | ||
| Ongoing Cross-Border Supervisory Coordination | ||
| References | ||
| Glossary (107KB pdf file) | ||
| Annex: Summing Up by the Chairman (107KB pdf file) | ||
| Statistical Appendix (1,321KB pdf file) | ||
| Boxes | ||
| 1.1 | The Alphabet Soup of Subprime Mortgage Securitization—ABS, ABX, and CDOs | |
| 1.2 | Bond Flows: Demand Response to Interest Rate and Exchange Rate Shifts | |
| 1.3 | Zambia: A Case Study | |
| 1.4 | Have Hedge Fund Risks Also Risen? | |
| 1.5 | Causes and Implications of the February–March 2007 Market Correction | |
| 1.6 | Constant Proportion Debt Obligations | |
| 2.1 | Foreign Direct Investment Flows | |
| 2.2 | Shifting from Home Bias to “Intra-European” Bias? | |
| 2.3 | Evolution of the Home Bias in U.S. Equity Portfolios | |
| 2.4 | The Importance of Internationally Comparable Bilateral Statistics | |
| 2.5 | Country, Regional, and Global Determinants of Capital Outflows | |
| 2.6 | Liquidity of Brazilian Inflation-Linked Instruments | |
| 3.1 | Some Evidence on Systemic Stability Aspects of Bank Globalization | |
| 3.2 | Assessing Spillover Risks Among the World’s Largest Banking Groups | |
| 3.3 | Operational Risk and Business Continuity | |
| 3.4 | Examples of Bank Failures with Cross-Border Dimensions | |
| Tables | ||
| 1.1 | Stress Test: Impact of Home Price Appreciation (HPA) on Asset-Backed Securities (ABS) Collateralized by Subprime Mortgage Loans | |
| 1.2 | Foreign Currency Bond Issuance and Banking System Soundness: Europe, Middle East, and Asia (EMEA), and Kazakhstan and Russia | |
| 1.3 | Changes in Risks and Conditions Since the September 2006 Global Financial Stability Report | |
| 1.4 | U.S. Fixed-Income Trading Volume—Hedge Funds, 2005 | |
| 2.1 | Pension Fund Asset Allocation in Selected Countries | |
| 2.2 | Accumulation of Official Foreign Exchange Reserves of Selected Countries | |
| 2.3 | Top Sovereign Wealth Funds | |
| 2.4 | Distribution of Foreign-Owned U.S. Long-Term Securities 78 | |
| 2.5 | Estimates of the Effect of Reserve Accumulation on U.S. Treasury Yields | |
| 2.6 | Determinants of Returns on Emerging Market External Debt | |
| 2.7 | Liberalization of Capital Outflows: Recent Experiences of Selected Countries | |
| 2.8 | Performance of Selected Emerging Financial Markets, May 8–June 23, 2006 | |
| 3.1 | Financial Industry Mergers and Acquisitions (M&A), 1996–2006 | |
| 3.2 | Foreign Bank Ownership, by Region | |
| 3.3 | Cross-Border Activities of the 90 Largest Banks, 2005 | |
| Figures | ||
| 1.1 | Global Financial Stability Map | |
| 1.2 | Residential Mortgage-Related Securities Market | |
| 1.3 | Mortgage Delinquency Rates | |
| 1.4 | Subprime 60-Day Delinquencies by Mortgage Vintage Year | |
| 1.5 | U.S. Mortgage Universe | |
| 1.6 | Synthetic (ABX) and Cash (ABS) BBB- Subprime Spreads | |
| 1.7 | Corporate Profits for Euro Area, Japan, and the United States 11 | |
| 1.8 | Weighted Average Cost of Capital versus Debt as a Share of Capitalization | |
| 1.9 | Private Equity Buyouts and Leveraged Loan Issuance | |
| 1.10 | U.S. Corporate and Buyout Leverage | |
| 1.11 | U.S. Corporate Bond and Loan Issuance | |
| 1.12 | Global Speculative Default Rates | |
| 1.13 | Sources of Financing for the U.S. Current Account Deficit | |
| 1.14 | Net Foreign Purchases of U.S. Fixed-Income Securities by Type | |
| 1.15 | Response (of Bond Flows/GDP) to a 1 Percent Spread Increase: Period 2 (2002–05) | |
| 1.16 | Indicators of External Vulnerability in Emerging Markets | |
| 1.17 | Emerging Market External Issuance | |
| 1.18 | Emerging Market Credit Quality Index | |
| 1.19 | Cumulative Net Flows to Emerging Market Funds | |
| 1.20 | Implied Volatility Indices | |
| 1.21 | Volatility and the U.S. Business Cycle | |
| 1.22 | Foreign Exchange Carry Trade Returns and Volatility | |
| 1.23 | Institutional Currency Positioning | |
| 1.24 | Japanese International Capital Flows | |
| 1.25 | Bank Willingness to Lend and Corporate Default Rates | |
| 1.26 | Relative Price of “Tail Risk” in Foreign Exchange Markets | |
| 1.27 | Correlation of Asset Classes with S&P 500 and Broad Market Volatility | |
| 1.28 | Volatility Shocks to Sovereign Spreads | |
| 1.29 | G-3 Real Short-Term Interest Rates | |
| 1.30 | G-3 Excess Household and Corporate Liquidity | |
| 1.31 | Goldman Sachs Global Financial Conditions Index | |
| 1.32 | Custodial Reserve Holdings at the Federal Reserve Bank of New York | |
| 1.33 | Merrill Lynch Fund Manager Survey Question on Risk Appetite | |
| 1.34 | State Street Investor Confidence Index | |
| 1.35 | Total Inflows into Emerging Market Bond and Equity Funds | |
| 1.36 | Goldman Sachs Risk Aversion Index | |
| 1.37 | G-3 Average Economic Confidence Indicator | |
| 1.38 | Dresdner Kleinwort Global Economic Activity Surprise Index | |
| 1.39 | EMBIG Spreads: Actual and Fundamental Model Estimates | |
| 1.40 | Emerging Market Credit Quality: Net Credit Ratings Changes | |
| 1.41 | Median Volatility of Inflation Across Emerging Market Countries | |
| 1.42 | JPMorgan Emerging Market Foreign Exchange Implied Volatility Index | |
| 1.43 | Merrill Lynch Global High-Yield Index Spread | |
| 1.44 | Share of CCC or Lower-Rated Corporate Securities in Merrill Lynch Global High-Yield Index | |
| 1.45 | Moody’s Global Speculative Grade Default Rate | |
| 1.46 | Probability of Multiple Defaults in Select Portfolios for Large Complex Financial Institutions | |
| 1.47 | Hedge Fund Market Sensitivity Measure | |
| 1.48 | Average Net Speculative Positions in U.S. Futures Markets | |
| 1.49 | Composite Volatility Index | |
| 1.50 | Probability of Multiple Defaults in Select Portfolios | |
| 1.51 | Global Credit Derivatives Outstanding | |
| 1.52 | Global ABS, MBS, and CDO Issuance | |
| 1.53 | Global Hedge Funds | |
| 1.54 | Global Hedge Funds by Geographic Source of Funds | |
| 1.55 | Hedge Fund Sources of Capital by Investor Class, 2005 | |
| 2.1 | Total Global Cross-Border Inflows | |
| 2.2 | Assets Under Management of Institutional Investors in Mature Markets | |
| 2.3 | Portfolio Cross-Border Assets Held by Mature Markets | |
| 2.4 | Globalization of the Asset Management Industry | |
| 2.5 | Global Hedge Funds, Investor Base | |
| 2.6 | Current Account, Capital Flows, and Reserve Accumulation | |
| 2.7 | Foreign Exchange Reserves and the Short-Term Government Bond Market | |
| 2.8 | Leading Oil Exporters: Major Asset Purchases, 2002–06 | |
| 2.9 | Volatility of Net Cross-Border Purchases of Long-Term U.S. Treasury Securities | |
| 2.10 | Term Structure of Sovereign Credit Default Swap (CDS) Spreads, 2003–06 | |
| 2.11 | Volatility of Capital Inflows | |
| 2.12 | Volatility of Capital Outflows | |
| 2.13 | Changes in Net Capital Flow Volatility versus Reserve Ratios | |
| 2.14 | Share of U.S. Dollars in Reserves | |
| 2.15 | International Syndicated Loans to Emerging Market Corporates, by Credit Rating | |
| 2.16 | International Emerging Market Corporate Bond Issuance by Credit Rating | |
| 3.1 | Foreign Loans and Deposits of Bank for International Settlements Reporting Banks | |
| 3.2 | Foreign Bank Participation in Emerging Countries | |
| 3.3 | Foreign Bank Entry by Developing Countries, by Country Income Level, 2005 | |
| 3.4 | Worldwide Market Share of the Largest 40 Life Insurance Groups | |
| 3.5 | Gross Reinsurance Premiums Assumed and Ceded by Region, 2005 | |
| 3.6 | Cross-Border Diversification and Individual Bank Soundness, 1994–2004 | |
| 3.7 | Stock Price Correlation for Major Banks, 1990–2006 | |
| 3.8 | Concentration of Cross-Border Risk, end-June 2006 | |
| 3.9 | Selected Regions: Net Foreign Assets | |
| 3.10 | Net Foreign Bank Claims and External Position vis-à-vis Emerging Markets | |
| 3.11 | Central and Eastern European (CEE) Countries’ Bank Asset Structure, by Key Bank Groups, end-2005 | |
| 3.12 | Structure of Foreign Claims to Central and Eastern European (CEE) Countries, by Key Creditor Countries, end-March 2006 | |
| 3.13 | Home-Host Asymmetry in Foreign Bank Exposure, March 2006 | |
|
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. |