Risks to global financial stability

In its latest Global Financial Stability Report, the International Monetary Fund (IMF) warns that the overall global financial stability has deteriorated since its previous report in October 2024. This decline is attributed to tighter global financial conditions and heightened, persistent economic and geopolitical uncertainty—further intensified by escalating trade tensions following the U.S. announcement of widespread tariffs. All of this is unfolding in the context of high market volatility and a substantial increase in systemic risks.

Key highlights from the IMF's April 2025 Global Financial Stability Report:

• Main factors that have increased risks to international financial stability:
  
  
  • Still elevated asset valuations and worse-than-expected macroeconomic data: Despite recent adjustments in financial markets, some stock market and corporate bond segments still show inflated prices. This makes them vulnerable to corrections if macroeconomic forecasts deteriorate.
    
    
  • Episodes of volatility and stress in non-bank financial institutions: The rise in leverage among hedge funds and asset managers, along with their growing interconnectedness with the banking system, increases the risk of forced selling and financial contagion during margin calls or fund redemptions in times of crisis.
    
    
  • Risks in sovereign debt markets: High public debt in many advanced economies, combined with speculative strategies in futures and swaps markets, could trigger episodes of illiquidity and loss of confidence.
    
    
  • Fragility in emerging economies: Currency depreciation and capital outflows raise refinancing risks. This is particularly concerning in an environment of high yields and large external debt maturities.
    
    
• Repercussions on households and businesses resulting from economic uncertainty and the deterioration of financial conditions: i) Corporate bond spreads have widened, reflecting fears about future profitability and refinancing difficulties; ii) High interest rates and falling asset prices negatively affect household balance sheets; iii) The commercial real estate sector remains under pressure, complicating debt restructuring efforts due to insufficient collateral.
  
  
• Geopolitical Risk: The report points out that financial institutions should incorporate geopolitical risks into their risk management strategies, noting that their materialization can significantly impact financial stability by generating losses, abrupt stock market drops, and increases in sovereign risk premiums.
  
  
• The report offers numerous recommendations to address the aforementioned vulnerabilities, such as: ensuring that authorities guarantee effective access to central bank liquidity in the event of new asset price corrections and stress among leveraged institutions and being prepared to intervene in case of market dysfunctions, especially in public and corporate debt markets. It also emphasizes the need to strengthen supervision of non-bank entities, expand reporting requirements, and curb excessive leverage.