IMF chief warns of heightened risks to financial stability

Georgieva believes that due to the tightening of monetary policy in Western countries, the risk to global financial stability has increased.At the same time, she praised regulators for providing banks with the necessary liquidity.

Uncertainty in the global economy remains "exceptionally high" and global economic growth is expected to slow to below 3% this year, IMF chief Kristalina Georgieva said.

According to her, the situation in the economy is aggravated, including the recent collapse of several American banks, the conflict in Ukraine, the tightening of monetary policy in developed economies and the “scars” from COVID- 19 . “Risks to financial stability have increased in an environment of higher debt levels,” Georgieva stressed.

The HEAD of the IMF noted that the rapid transition from a long period of low interest rates to much higher rates needed to fight inflation "inevitably creates stress and vulnerability, which we have seen in recent developments in the banking sector."

“We have also seen policymakers act decisively in response to financial stability risks, and we have seen advanced economy central banks increase their provision of US DOLLAR liquidity,” she added. All these actions, Georgieva believes, to some extent eased the "stress in the markets."

In March, three US banks with $333 billion in assets closed within one week, including Silicon Valley Bank (SVB). The bank ranked 16th in terms of assets in the country (at the end of 2022, assets amounted to $211.8 billion, of which $120.1 billion were investments in securities, $73.6 billion were loans issued). In 2022, it was estimated at $40 billion.

After the collapse of the SVB, US President Joe Biden said that nothing threatened the country's banking system. Despite this, Moody's changed its outlook from stable to negative.

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The bankruptcy of credit institutions led to a drop in the capitalization of the banking sector in the US, Europe and Asia, as well as liquidity problems for some players. In particular, the Swiss Credit Suisse was forced to request a $54 billion loan from the Swiss NATIONAL BANK to stabilize the situation, but this did not stop the outflow of deposits. Subsequently, the bank was acquired at a deep discount by its competitor UBS, the deal was supported by the Swiss regulator.