Daily Management Review

IMF: Global banking system feels good, but risks in the US and China persist


According to Gita Gopinath, First Deputy Managing Director of the International Monetary Fund (IMF), there are risks for certain institutions in the US and China, but overall, the financial system is holding up very well in the face of rising interest rates and continuous wars throughout the world.

Duncan Smith/Corbis
Duncan Smith/Corbis
"We see that the global financial system is holding up fairly well overall, even in the face of the world's wars and a substantial increase in interest rates. However, there are still weak banks in the current setting. For instance, these banks make up 9% of total banking assets in the United States," she said during her speech at the Davos Economic Forum.

Gopinath continued, "The real estate industry, which is significant in both the US and Europe, is another area where the IMF sees risks."

The last year's banking crisis demonstrated that losses of faith in the banking system and the possibility of a systemic crisis can arise from a few medium-sized banks alone. 

Despite this, banks in emerging economies—aside from China—have fared very well; their high levels of regulatory capital have enabled them to weather the storm. In China, this is not the case. Gopinath noted, "China has some issues to be concerned about, particularly with smaller banks."

source: weforum.org