IMF chief warns risks to financial stability have increased

Author: Agencies

Interna­tional Monetary Fund (IMF) chief Kristalina Georgieva warned on Sunday that risks to financial stability had increased and stressed “the need for vig­ilance” following the recent turmoil in the banking sector.

Speaking at a forum in Beijing, the IMF managing director said she expected 2023 “to be anoth­er challenging year”, with glob­al growth slowing to below 3.0 per cent due the war in Ukraine, monetary tightening and “scar­ring” from the pandemic.

“Un­certainties are exceptionally high,” with the outlook for the global economy likely to remain weak over the medium term, she told the China Development Forum. “It is also clear that risks to financial stability have in­creased,” she added.

“At a time of higher debt levels, the rap­id transition from a prolonged period of low interest rates to much higher rates — necessary to fight inflation — inevitably generates stresses and vulnera­bilities, as evidenced by recent developments in the banking sector in some advanced econo­mies.” Her comments came after the financial sector was shaken by the collapse of Silicon Val­ley Bank and the enforced take­over of Swiss bank Credit Suisse by rival UBS, leading to fears of contagion.

Bank shares tum­bled on Friday as fears about the health of the financial sector resurfaced, with German Chan­cellor Olaf Scholz forced to give reassurances about Deutsche Bank after the long-troubled lender became a focus of inves­tor concerns.

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