Global near-term financial stability risks remain contained, but vulnerabilities are mounting in the long term
According to the International Monetary Fund (IMF) in its latest Global Financial Stability Report from October 2024, near-term financial stability risks remain contained although uncertainty is elevated, and vulnerabilities are mounting in an environment of widening disconnection between elevated economic and geopolitical uncertainty and low financial volatility. In this occasion the report provides an analysis of the advances in Artificial Intelligence and its implications for Capital Market Activities.
Main findings of the report:
- Near-term financial stability risks remain contained although uncertainty is elevated, and vulnerabilities are mounting rising risks in the future: Global economic activity has moderated, and inflation has continued to slow. Near-term financial stability risks remain contained although uncertainty is elevated, and vulnerabilities are mounting regarding: High assets valuations, the global rise in private and government debt and increased use of leverage by nonbank financial institutions (NBFIs).
- Economic and geopolitical uncertainty: related with the uncertainty about future policies of newly elected governments in a year of multiple elections across the world, and with the evolution of the ongoing military conflicts. In this regard, the IMF highlights the widening disconnect between uncertainty and market volatility which could increase the chance of sudden surges in volatility and sharp asset repricing if an adverse shock occurs, which could be amplified by the vulnerabilities.
- The global banking sector has remained resilient, with ample capital and liquidity buffers. Although nonperforming loan ratios have increased for some forms of lending, such as consumer credit cards, automobile loans, and CRE, overall asset quality has not deteriorated significantly. However, net interest margin and bank profitability could be negatively impacted by interest rate cuts among major central banks.
- AI and machine learning opportunities and risks in capital markets. Adopting these new technologies may bring efficiencies and cost savings to both banks and NBFIs, the latter are generally more agile and subject to fewer constraints in using AI. However, widespread adoption could also worsen financial fragilities in the future, through potentially higher volatility during market stress, more opacity or reliance on a few key AI service providers.
Filter results
According to IE University’s Center for the Governance of Change, deeper and more integrated financial markets would strengthen the euro’s global role. This requires, among other elements, resilient and interoperable payment systems and completing the banking union.
Partnerships between banks and private credit: The winners will be those that combine bank underwriting discipline, distribution, and customer access with private capital’s appetite for long-dated, illiquid risk, according to Oliver Wyman.
Lucrezia Reichlin (CEPR): A CBDC is not a prerequisite for monetary sovereignty. Confusing money with payments can risk misdiagnosing the problem and misaligning economic policy efforts.
According to the World Economic Forum´s Global Risk Report 2026, geoeconomic confrontation, mis- and disinformation and societal polarization make up the top three short-term risks, while environmental risks dominate in the long term.
According to the World Economic Forum, over the last few years AI has moved from experimentation to workflow integration, promising systemic gains in productivity while also raising critical questions around economic inclusion, values, trust and resilience.
According to AFME, a clearer, more coherent, and proportionate regulatory environment, without unnecessary layers and focuses on growth and competitiveness, is keyl to increase investor confidence, unlock private capital and deepen European capital markets
According to the Center for the Governance of Change at IE University, Europeans support technological progress if it reinforces security, inclusion, and social welfare; but resist it when change feels imposed, opaque, or misaligned with their values.
According to a recent report released by CEPS, European financial regulators should adopt competitiveness as a formal secondary objective, following the precedent established by the UK's Financial Services and Markets Act 2023.
According to the OECD. SMEs and start-ups that grow rapidly contribute significantly to job creation, economic growth and competitiveness. Indeed, SMEs that grow by one-third over a three-year period, contribute about as much to job creation as large firms.
According to @McKinsey, banks must prepare for a new growth curve. Strategic precision —the ability to combine technology, capital discipline, and deep customer insight— will distinguish the leaders from the laggards.
According to Kristalina Georgeva IMF Managing Director, lifting growth requires three things: one, regulatory housecleaning to unleash private enterprise; two, deeper regional integration; and three, preparedness to harness AI.
According to The European House – Ambrosetti, the European Union has an opportunity to boost competitiveness and growth by simplifying regulatory and supervisory frameworks, particularly in the areas of sustainability and the financial sector.