APR
2023
High InflationandHigh GeopoliticalRisks
REPORTSafeguarding Financial Stability amid
STABILITY
FINANCIAL
GLOBAL
INTERNATIONAL MONETARY FUND MONETARY INTERNATIONAL
GLOBAL FINANCIAL STABILITY REPORTINTERNATIONAL MONETARY FUND
GLOBAL
FINANCIAL
STABILITY
REPORT
Safeguarding Financial Stability amid
High Inflation and Geopolitical Risks
2023
APR (c)2023 International Monetary Fund
Cover and Design: IMF CSF Creative Solutions Division
Composition: Absolute Service, Inc.; and AGS, An RR Donnelley Company
Cataloging-in-Publication Data
IMF Library
Names: International Monetary Fund.
Title: Global financial stability report.
Other titles: GFSR | World economic and financial surveys, 0258-7440
Description: Washington, DC : International Monetary Fund, 2002- | Semiannual | Some issues also have thematic
titles. | Began with issue for March 2002.
Subjects: LCSH: Capital market—Statistics—Periodicals. | International finance—Forecasting—Periodicals. |
Economic stabilization—Periodicals.
Classification: LCC HG4523.G557
ISBNs: 979-8-40023-324-1 (paper)
979-8-40023-329-6 (ePub)
979-8-40023-326-5 (web PDF)
Disclaimer: The Global Financial Stability Report is a survey by the IMF staff published twice a year, in
the spring and fall. The report draws out the financial ramifications of economic issues highlighted in the
IMF’s World Economic Outlook. The report was prepared by IMF staff and has benefited from comments
and suggestions from Executive Directors following their discussion of the report on March 30, 2023.
The views expressed in this publication are those of the IMF staff and do not necessarily represent the
views of the IMF’s Executive Directors or their national authorities.
Recommended citation: International Monetary Fund. 2023. Global Financial Stability Report: Safeguarding
Financial Stability amid High Inflation and Geopolitical Risks. Washington, DC, April.
Please send orders to:
International Monetary Fund, Publications Services
PO Box 92780, Washington, DC 20090, USA
Tel.: (202) 623-7430 Fax: (202) 623-7201
E-mail: publications@imf
bookstore.IMF
elibrary.IMF CONTENTS
Assumptions and Conventions vii
Further Information viii
Preface ix
Foreword x
Executive Summary xii
IMF Executive Board Discussion of the Outlook, March 2023 xviii
Chapter 1 A Financial System Tested by Higher Inflation and Interest Rates1
Chapter 1 at a Glance 1
Turmoil in the Banking Sector Jolted Markets 5
Central Banks Responded Quickly, But Consequences Were Already in Motion7
Higher Inflation and Tighter Monetary Policy Are Exposing Fault Lines in Banking Systems 12
Nonbank Financial Intermediaries Levered Up during the Low Rate–Low Volatility Era 15
Various Other Headwinds Could Challenge Investor Sentiments16
Financial Stability Risks Are Elevated 19
Advanced Economies Face the Difficult Task of Ensuring Financial Stability while
Bringing Inflation Back to Targets 20
Quantitative Tightening amid High and Increasing Public Debt24
Quantitative Tightening Adds Challenges to Money Markets 26
Emerging Markets: Higher Rates Pose Debt Risks to Vulnerable Countries 28
Frontier Markets and Low-Income Countries Face Financing and Debt
Sustainability Challenges32
China’s Reopening Brings Hope of Economic Recovery although Downside Risks Remain 33
The Corporate Sector Is Navigating the Challenges of Higher Interest Rates and a
Slowing Economy 35
Housing Markets Are Slowing, Headwinds Picking Up Speed 37
Commercial Real Estate Market under Pressure 40
Policy Recommendations 44
Box 1.1. The Failures of Silicon Valley Bank and Signature Bank 47
Box 1.2. The Failure of FTX Unveiled High Interconnectedness in the Crypto Ecosystem 49
Box 1.3. The Fast-Growing Interest in Retails’ Trading in the Zero-Day Options Market:
Is It a Hidden Risk?50
Box 1.4. Potential Spillover Effects of Changes to Japan’s Yield Curve Control Policy 52
Box 1.5. The Impact of the Energy Crisis on the Transition toward a Low-Carbon and
Secure Energy System55
References 57
Chapter 2 Nonbank Financial Intermediaries: Vulnerabilities Amid Tighter Financial Conditions 59
Chapter 2 at a Glance 59
Introduction60
Nonbank Financial Intermediaries’ Use of Financial Leverage Can Amplify Shocks61
Liquidity Vulnerabilities at Nonbank Financial Intermediaries Catalyze Stress63
The Increasing Interconnectedness of Nonbank Financial Intermediaries and the
Financial System 64
Regulatory Data Gaps 66
Four Case Studies of Nonbank Financial Intermediaries67
International Monetary Fund | April 2023 iii