GFSR – interview with Jose Vinals



Over the last six months, global financial stability risks increased because of higher economic risks and uncertainty, falling commodity prices, and concerns about China’s economy, according to the IMF’s financial counsellor Jose Vinals.
Washington, DC – 13 April, 2016 1. Wide shot IMF with Spring Meetings signage SOUNDBITE: (English) Jose Vinals, Financial Counsellor, IMF: “Risks to global financial stability have increased over the last six months. And this has been due to three main factors. First, higher macroeconomic risks in the context of a weaker growth and inflation outlook. Second, falling commodity prices and increasing concerns about China, which have put pressure on emerging markets and in credit markets in advanced economies. And, third, lower confidence in policies and in policy traction in an environment of higher economic, financial, and political and geopolitical risks.” Washington, DC – Recent 2. People taking money out of cash machines 3. Washington, DC – 13 April, 2016 4. SOUNDBITE: (English) Jose Vinals, Financial Counsellor, IMF: “It is essential that banks' remaining challenges are addressed once and for all because they are a key to financing the economic recovery. Banks are pressured as result of two developments, cyclical and structural. Cyclical because of the weaker growth and inflation outlook which puts downward pressure on bank profitability, and second, structural challenges coming from the need to further adapt the business models of banks. For example, if we look at advanced economy banks the percent of bank assets which belong to banks which have significant business model adjustments to make is about 15 percent. And in the Euro area to these you have to add dealing with non performing loans and excess bank capacity that exists.” Beijing, China – Recent 5. People walking down the street 6. Washington, DC – 13 April, 2016 7. SOUNDBITE: (English) Jose Vinals, Financial Counsellor, IMF: “China has embarked on multiple transitions and it's making good progress in rebalancing its economy and also in moving to a more market based financial system. But it's also true that there are challenges, challenges linked to the deteriorating health of corporates in China, in the context of loan growth, and of diminished corporate profitability. Now this is reflected in the fact that corporate debt at risk of not being repaid, meaning corporates whose earnings are below the debt service has gone up to about 14 percent of total corporate debt. And this may imply in the future potential bank losses of up to 7 percent of GDP. Now this is a significant number, but it's also manageable given that banks have buffers and also that there is fiscal room for maneuver because there is a low debt to GDP. So this is manageable, but this issue needs to be managed now.” New York, New York - Recent 8. Wide shot Wall Street Close-up bull
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