Financial stability has broadly improved in advanced countries: International Monetary Fund

WASHINGTON: Financial stability has broadly improved in advanced countries and has deteriorated in emerging economies in the past six months, the International Monetary Fund said in its latest Global Financial Stability Report released today.

"I am pleased to tell you that global financial stability is improving --- we have begun to turn the corner. "But it is too early to declare victory as there is a need to move beyond liquidity dependence by overcoming the remaining challenges to global stability," José Viñals, IMF's Financial Counsellor, told reporters at the release of the report on the sidelines of the IMF and World Bank Group Spring Meetings.

The US economy is gaining strength, setting the stage for normalisation of monetary policy, he said. In Europe, better policies have led to substantial improvements in market confidence in both sovereigns and banks. In Japan, Abenomics (measures taken by Japanese Prime Minister Shinzo Abe to revive the economy) has made a good start as deflationary pressures are abating and confidence for the future is rising.

"And emerging market economies, having gone through several recent bouts of turmoil, are adjusting policies in the right direction," Viñals said. The IMF, he said, continues to track growing hot spots in the US financial system. Many of these are in the shadow banking system, such as strong issuance of high-yield bonds and leveraged loans, weakened underwriting standards and underpricing of risk.