The IMF published its latest Global Financial Stability Report in Bangkok, Thailand, during the IMF-World Bank Annual Meetings.
The report finds that global financial markets have remained resilient, but financial stability risks remain elevated.
“Global financial markets have held up surprisingly well despite multiple shocks and very high uncertainty to a large extent because of upward growth surprises, strong corporate earnings, but also optimism on AI. But resilience is not safety. Financial stability risks remain elevated and there are key risks that could spark market stress. First, an AI-related market correction if expectations on investment or profits disappoint. Second, the already evolving risk of rising sovereign bond yields on the back of inflation pressures, fiscal imbalances and massive issuance from sovereigns and increasingly from the private sector. And third, cyber incidents that could disrupt financial services or weaken confidence. These risks may be manageable on their own, but existing vulnerabilities could amplify them,” said – Athanasios Vamvakidis, Deputy Division Chief, Monetary and Capital Markets Department, IMF
The IMF says the banking sector remains resilient under a severe stress test involving shocks related to AI, bond markets, and energy. However, vulnerabilities among weaker banks and non-bank financial institutions could amplify future stress.
“Unresolved vulnerabilities could amplify shocks. The banking sector remains resilient under a severe stress test of shocks on AI, the bond market and energy. However, there is a tail of weak banks that in this scenario will be under-capitalized and this share has been increasing. Several other vulnerabilities deserve close attention. Starting with NBFIs. First, insurance and pension funds hold more illiquid assets, raising risks in a downturn. Second, private credit faces higher board leverage and growing liquidity pressures, which could restrict lending. And third, hedge funds can support markets, but leverage and crowded trades could amplify stress. Moving to emerging markets, they’ve been resilient. However, there are concerns about weaker policy buffers in some cases, and less transparent alternative funding sources, in some frontier economies that could weigh on market taxes,” added Vamvakidis.
With public debt high and policy space more limited than in the past, the IMF is calling for action before new shocks hit. It says strengthening financial-system resilience should now be the main priority.
“Strengthening resilience now, before shocks hit, should be the main focus. Public debt is high. Inflation remains a path target in many economies and policy space is more limited than in the past. That makes it important to put debt on a sustainable path, preserve central bank independence, stick to the inflation mandates and communicate policy clearly and strengthen cyber resilience. Risks across banks and non-bank financial institutions also require close monitoring. The bottom line is simple. Now is the time to strengthen the financial system,” explained Vamvakidis.
To read the full report, click here: Global Financial Stability Report 2026
Source: mediacenter.imf.org
