: Too soon to know if recent bank troubles are isolated events, IMF says

by | Apr 11, 2023 | Stock Market

It is too soon to know for sure whether the recent bank failures in the United States and the merger of Credit Suisse with UBS were isolated events or a harbinger of future troubles, the International Monetary Fund said Tuesday. While market anxiety has been reduced in recent days, market sentiment remains “fragile” and strains are still evident, the international financial institution said, in its latest report on global financial conditions.

“Concerns remain about vulnerabilities that may be hidden,” not just at banks, but in the shadow banking sector, the report said. “The impact of tighter monetary and financial conditions could be amplified because of financial leverage, mismatches in asset and liability liquidity, and a high degree of interconnectedness within the nonbank financial intermediation sector and with the traditional banking institutions. This raises the specter of stress in some sectors—such as venture capital, technology, and commercial real estate sectors—that have been particularly hit by the removal of ample liquidity spilling over to the rest of the financial system,” the IMF said. At the same time, more traditional concerns remain. Large emerging market countries, which have avoided adverse spillovers from tightening advanced economies, could see ca …

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