The recent banking turmoil in the United States and Europe could spill over to crucial non-bank institutions such as pension funds, further complicating central banks’ fight against high inflation, the International Monetary Fund (IMF) warned on Tuesday.
banking riskscould intensify in the coming months amid continued tightening of global monetary policy” and also spread to the interconnected nonbank sector, which currently holds half of all global financial assets, IMF economists said in an IMF blog post.
The considerations accompanied a chapter of the IMF’s semi-annual report on global financial stability.
Central banks on both sides of the Atlantic have been juggling trying to reduce inflation by raising interest rates without hurting the banking sector after the dramatic collapse of US Silicon Valley Bank (SVB).
The California-based (western) bank failed after taking on excessive interest rate risk, leaving it overexposed as the US Federal Reserve (Fed, central bank) began its aggressive campaign of benchmark rate hikes in 2022 .
Non-bank financial intermediaries (NBFIs), such as pension fund and investment firms, have grown enormously since the global financial crisis of 2008, when regulators moved to tighten rules on banks.
They are highly interconnected with traditional banks, and can “become a crucial amplification channel for financial stressthe IMF said.
Source: AFP
Source: Gestion
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