IMF warns of rising threats to global financial system, says report
The International Monetary Fund (IMF) on Wednesday, April 18, warned that threats to the global financial system were on the rise and the price of risky assets increasing in a way which reminds one of the scenarios that existed before the global financial crisis, Bloomberg reported.
In the latest edition of its Global Financial Stability Report, the IMF said downside risks to the global financial stability have gone up "somewhat" in the last six months.
"Financial vulnerabilities, which have accumulated during years of extremely low rates and volatility, could make the road ahead bumpy and could put growth at risk," Bloomberg quoted the world finance body as saying.
The IMF also cautioned investors not to take "too much comfort" in the fact that the sharp selloff that rocked the markets in February did not cause major disruptions.
"Valuations of risky assets are still stretched, with some late-stage credit cycle dynamics emerging, reminiscent of the pre-crisis period," it said, the Bloomberg reported. The IMF said this would expose the markets to a sharp tightening in financial conditions.
The Washington-based fund said stock prices are high relative to fundamentals across the globe, particularly in the US.
The IMF's warning came as finance ministers and central banking officials from the body's member countries assembled in Washington for the annual spring meetings.
The heightening trade tensions in the recent years have also caused "jitters" among the investors, the Bloomberg report quoted Tobias Adrian, director of the IMF's monetary and capital markets department, as saying.
Adrian also said the rise of cryptocurrencies has also posed a challenge to the financial system. He also pointed out that there "infrastructural weaknesses" in cryptocurrency exchanges and risk of high volatility and fraud, the Bloomberg report added.