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IMF warns of threats to financial security

IMF warns of threats to financial security

Risks to global financial stability have increased over the past six months, according to the International Monetary Fund (IMF).

The organisation blamed falling commodity prices, concerns over China’s economy and general uncertainty across global markets as reasons why talk of recession had increased.

However, the IMF’s latest Global Financial Stability report also said markets appeared significantly improved since February, after the European Central Bank intensified its actions and the US Federal Reserve took a more cautious stance towards raising rates.

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José Viñals, head of the IMF’s monetary and capital markets department, said: “A key question that this report addresses is whether the turmoil over the past months is now safely behind us, or is it a warning signal that more needs to be done?”

He reckoned it was the latter, and that more needed to be done to secure global stability.

The IMF recommended the following policies for calming concerns:

• Advanced economies need to tackle ‘crisis legacies’, particularly banks that play a key role in financing the economy.

• Emerging markets need to bolster their resilience to global headwinds.

• Corporate vulnerabilities need to be closely monitored and banks need to be more resilient.

• Upgrade the supervisory framework to support an increasingly complex financial system.

But the report also said policymakers should not over rely on monetary policy, stating that it remains crucial, but cannot be the only game in town. The document stated: “Well-designed structural reforms and growth-friendly and supportive fiscal policies are essential.”

katherine.denham@ft.com