A Decade After the Global Financial Crisis: Are We Safer?

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October 2018/IMF

EXECUTIVE SUMMARY

In the 10 years since the global financial crisis, regulatory frameworks have been enhanced and the banking system has become stronger, but new vulnerabilities have emerged, and the resilience of the global financial system has yet to be tested.

Since the last Global Financial Stability Report (GFSR), nearterm risks to global financial stability have increased somewhat, but financial conditions are still broadly accommodative and supportive of growth in the near term.

That said, risks could rise sharply should pressures in emerging market economies mount or if trade tensions escalate.

Meanwhile, medium-term risks remain elevated, as easy financial conditions contribute to a further buildup of financial vulnerabilities.

Over the past six months, global financial conditions have marginally tightened and the divergence between advanced and emerging market economies has grown. The global economic expansion continues, providing an opportunity to strengthen balance sheets and rebuild buffers, but growth appears to have peaked in some major economies, as discussed in the October 2018 World Economic Outlook (WEO).

Yet financial conditions in advanced economies remain accommodative, particularly in the United States, with interest rates still low by historical standards, risk appetite robust, and asset valuations rising in major markets.

Financial conditions have remained broadly stable in China, where authorities have eased monetary policy to offset external pressures and the impact of tighter financial regulations.

In contrast, financial conditions in most emerging market economies have tightened since mid-April, driven by higher external financing costs, rising idiosyncratic risks, and escalating trade tensions.

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