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Global Financial Stability Report
Containing Systemic Risks and Restoring Financial Soundness
April 2008

The Global Financial Stability Report provides semiannual assessments of global financial markets and addresses emerging market financing in a global context.

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   View the Full Text of the GFSR (use the free Adobe Acrobat Reader).
 

Contents

Preface(90KB pdf file)
 
Executive Summary(90KB pdf file)
 
Chapter I. Assessing Risks to Global Financial Stability
Full Text (1,700KB pdf file)
 
  Global Financial Stability Map
  Credit Deterioration -- How Deep and Widespread?
  Systemic Risks Have Risen Sharply
  Will Emerging Markets Remain Resilient?
  Credit Squeeze or Credit Crunch?
  Immediate Policy Challenges
  Annex 1.1. Global Financial Stability Map: Construction and Methodology
  Annex 1.2. Methodology for Calculating Global Losses and Bank Exposures
  References
 
Chapter II. Structured Finance: Issues of Valuation and Disclosure
Full Text (715KB pdf file)    |   Summary
 
  Valuation and Disclosure of Complex Structured Finance Products
  The Role of Off-Balance-Sheet Entities
  Conclusions and Outlook
  Annex 2.1. The World According to GAAP
  References
 
Chapter III. Market and Funding Illiquidity: When Private Risk Becomes Public
Full Text (1,100KB pdf file)    |   Summary
 
  The Nature of Market Liquidity Risks
  Funding Liquidity Risks
  Market and Funding Liquidity Dynamics
  Liquidity Dynamics Since July 2007: An Empirical Investigation
  The Role of Central Banks During Periods of Market and Funding Illiquidity
  Central Banks' Response to Liquidity Strains Since July 2007: An Empirical Investigation
  Recommendations to Enhance Liquidity Risk Management
  Conclusion
  Annex 3.1. Liquidity Dynamics Since Summer 2007
  References
 
Glossary (270KB pdf file)
 
Annex: Summing Up by the Acting Chair
 
Statistical Appendix (1,331KB pdf file)
 
Boxes
1.1 Outlook for U.S. High-Yield Corporate Debt Markets and Default Rates
1.2 Do Sovereign Wealth Funds Have a Volatility-Absorbing Market Impact?
1.3 The Rise in Balance Sheet Leverage of Global Banks
1.4 Quantitative Financial Stability Modeling
1.5 Banking Stability Index
2.1 Structured Finance: What Is It and How Did It Get So Large?
2.2 When Is a AAA not a AAA? (Part 1: The ABCs of MBSs and CDOs)
2.3 When Is a AAA not a AAA? (Part 2: Actual versus Market-Implied Mortgage-Backed Security Ratings)
2.4 When Is a AAA not a AAA? (Part 3: Collateralized Debt Obligation Rating Dynamics)
2.5 Conduits, SIVs and SIV-Lites
2.6 Consolidation of Structured Investment Vehicles: An Illustrative Example of Issues That Arise
3.1 The Determinants of Market Liquidity
3.2 Liquidity-Adjusted Value-at-Risk: At the Forefront of Market Liquidity Risk Management?
3.3 Standard Ways to Measure and Control Bank Liquidity Risks
3.4 Institute of International Finance Principles of Liquidity Risk Management
3.5 Central Bank Counterparties
3.6 Liquidity Regulation and the Basel Process
 
Tables
1.1 Estimates of Financial Sector Potential Losses as of March 2008
1.2 Typical "Haircut" or Initial Margin
1.3 Macro and Financial Indicators in Selected Emerging Market Countries
1.4 Changes in Risks and Conditions Since the October 2007 Global Financial Stability Report
1.5 Losses by Asset Class as of March 2008
1.6 Global Bank Losses as of March 2008
2.1 Accounting for Securities Held as Financial Assets
2.2 U.S. Subprime Exposures and Losses
2.3 Market Participants in Credit Derivatives, 2004 and 2006
3.1 Impact of Central Bank Interventions on LIBOR-OIS Spreads
 
Figures
1.1 Global Financial Stability Map
1.2 Mortgage Delinquencies by Vintage Year
1.3 U.S. Mortgage-Related Securities Prices
1.4 U.S. and European House Price Changes
1.5 U.S. and UK Nonconforming Delinquencies by Mortgage Vintage Year
1.6 Commercial Mortgage Borrowing and Real Estate Prices
1.7 CMBX Spreads
1.8 Charge-Off Rates for U.S. Consumer Loans
1.9 Credit Card Charge-Off Rates versus Credit Card Asset-Backed Spreads on Securities
1.10 LCDX Prices and Spreads
1.11 U.S. Leveraged Buyout Loans: Credit Quality Indicators
1.12 Comparison of Financial Crises
1.13 Expected Bank Losses as of March 2008
1.14 Financial Guarantors
1.15 Systemic Bank Default Risk
1.16 Securitization Volume in the European Union (EU-15)
1.17 Bank Equity Price Changes and Balance Sheet Leverage
1.18 U.S. Funding Market Liquidity
1.19 Euro Area Funding Market Liquidity
1.20 Decomposing Interbank Spreads
1.21 External Position of Emerging Markets by Region vis-à-vis BIS Reporting Banks
1.22 Selected European Banks: Dependence on Wholesale Funding as of March 2008
1.23 Central and Eastern Europe: Growth in Private Credit and House Prices, 2002-06
1.24 Baltic States, Bulgaria, and Romania: Credit to Households by Type
1.25 Baltic States' 5-Year Credit Default Swap Spreads and Romanian Leu
1.26 Emerging Markets: Private Sector External Bond Issuance
1.27 Carry-Trade Index and Currency Volatility
1.28 Heat Map: Developments in Systemic Asset Classes
1.29 Spreads Across Credit: Historical Highs, Lows, and Current Levels
1.30 U.S. Private Sector Net Debt Issuance by Sector
1.31 G-3 Bank Lending Conditions
1.32 U.S. Private Sector Borrowing
1.33 Impulse Response of U.S. GDP to Credit Shocks
1.34 Global Financial Stability Map: Monetary and Financial Conditions
1.35 Global Financial Stability Map: Risk Appetite Conditions
1.36 Global Financial Stability Map: Macroeconomic Risks
1.37 Global Financial Stability Map: Emerging Market Risks
1.38 Global Financial Stability Map: Credit Risks
1.39 Global Financial Stability Map: Market and Liquidity Risks
2.1 Selected U.S.-Based Financial Institutions: Change in Level 3 and 2 Assets
2.2 Writedowns of Selected Financial Institutions: October 15, 2007-February 14, 2008
2.3 Timelines for Implementation of Basel II Framework
2.4 Market Participants in Credit Derivatives, 2006
2.5 Structured Credit Products by Market Participants
2.6 Financial Guaranty Industry Insured Portfolio Distribution, 2006
3.1 Commercial Banks: Deposit-to-Asset Ratios
3.2 Aggregate Bank Credit Default Swap Rate and Selected Spreads
3.3 United States: Selected Money Market Spreads
3.4 United States: S&P 500 Stock Market Returns and Aggregate Credit Default Swap Rate
3.5 On-the-Run/Off-the-Run Five-Year U.S. Treasury Note Spread
3.6 U.S. Model: Selected Implied Correlations from Dynamic Conditional Correlation GARCH Specification
3.7 Advanced Economies Model: Selected Implied Correlations from Dynamic Conditional Correlation GARCH Specification
3.8 Three-Month LIBOR to Overnight Index Swap Spreads
3.9 Central Bank Key Policy and Overnight Money Market Rates
3.10 European Central Bank's Liquidity Provision and Reserve Holdings
3.11 Euro Area: Selected European Central Bank Policy Actions and Term Funding Stress
3.12 United States: Selected Federal Reserve Policy Actions and Term Funding Stress
3.13 U.S. Model: Implied Correlations from Dynamic Conditional Correlation GARCH Specification
3.14 Advanced Economies Model: Implied Correlations from Dynamic Conditional Correlation GARCH Specification
3.15 Emerging Markets Model: Implied Correlations from Dynamic Conditional Correlation GARCH Specification
 

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