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People walk along Wall Street in the Financial District on September 02, 2020 in New York City.
Some banking system vulnerabilities that were elevated before the coronavirus pandemic have continued to rise in recent months, setting up a major test of the resilience of the global financial system, the International Monetary Fund said Tuesday.
Swift, massive intervention by central banks and government spending helped avoid a financial catastrophe so far, but have not eliminated the risks, the IMF said, in its latest Global Financial Stability Report. There is a now a gap between rising market valuations and the evolution of the economy. The odds of a sharp adjustment may rise if investors reassess the outlook, the report warned. The IMF said vulnerabilities were elevated in several sectors across 29 countries with systemically important financial sectors. They contributed to the market selloff in March and have continued to rise, the IMF said. “Some pre-existing financial vulnerabilities are now intensifying, representing potential headwinds to the recovery,” said Tobias Adrian, the IMF’s financial counsellor at a press briefing to discuss the report. Triggers such as new virus outbreaks, policy missteps or other shocks could lead to more bankruptcies, tightening of bank lending standards and tightening …
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