IMF chief warns global financial stability at risk from banking turmoil
The head of the International Monetary Fund has warned that the global economy faces risks to its financial stability because of the turbulence in the banking sector.
Kristalina Georgieva, the managing director of the Washington-based lender of last resort, said rising interest rates have put pressure on debts, leading to “stresses” in leading economies, including among lenders.
Georgieva said the world economy would expand by just 3% in this year as rising borrowing costs, combined with the war in Ukraine and scarring from the Covid-19 pandemic would suffocate growth.
Adding to a growing chorus of warnings from economic leaders, the IMF chief said it was clear that risks to financial stability had increased after the recent collapse of Silicon Valley Bank and Swiss-government brokered rescue of Credit Suisse by UBS.
Investors will also be watching shares in Deutsche Bank when European markets reopen on Monday after shares in the German lender led the sell-off in banking stocks on Friday.
“At a time of higher debt levels, the rapid transition from a prolonged period of low interest rates to much higher rates – necessary to fight inflation –inevitably generates stresses and vulnerabilities, as evidenced by recent developments in the banking sector in some advanced economies,” Georgieva said, speaking at a conference in Beijing.
Her stark comments came as the European Central Bank (ECB) said the recent turmoil in banking would have a real-world impact on business and growth.
The EU central bank fears problems in the banking sector will result in lower growth, and dampen inflation, the ECB vice-president, Luis de Guindos, said in an interview with Business Post. “Our impression is that they will lead to an additional tightening of
Read more on theguardian.com
