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Next Financial Crisis Could Overwhelm World's Defenses

IMF report raises concerns about whether the global financial safety net offers adequate protection in the event of a crisis.

By Andrew Mayeda, Bloomberg | Updated on March 17, 2016

The global financial safety net has become increasingly fragmented, making it harder to respond to crises in a world roiled by volatile capital flows, International Monetary Fund (IMF) staffers warned.

Defenses haven’t kept up with the growth of external debt in recent years, the Washington-based fund said in a report released Thursday. As a result, a system-wide shock could overwhelm the world’s crisis resources, which include nations’ foreign-exchange reserves, central-bank swap lines, regional funds such as the euro area’s European Stability Mechanism, and the IMF itself, the lender said.

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