The global financial system is still the “Achilles heel” of the economic recovery, according to the International Monetary Fund’s Global Financial Stability Report, entitled, “Sovereigns, Funding, and Systemic Liquidity”.
Progress toward global financial stability has experienced a setback since the April 2010 GFSR, with the recent turmoil in sovereign debt markets in Europe –particulary Ireland, Greece, Spain and Portugal- highlighting increased vulnerabilities. The following policy reforms are put forward to ensure a viable global financial system and safeguard the recovery:
1. Deal with the legacy problems in the banking sector, including, where necessary, recapitalization
2. Strengthen the fundamentals of sovereign balance sheets
3. Continue to clarify and specify regulatory reform
The full report is available online.