The IMF’s latest financial stability report reviews the changes introduced over the last decade in the regulation and supervision of the financial sector. These changes had a clear objective from the outset: to make the system more secure. The study’s final conclusion is that the intended goal has been achieved, although only in the case of banks.
Banks are more solid, with better liquidity ratios and subject to strict scrutiny in terms of prudence and resolution. Naturally, it is always possible to go further, although it is necessary to calibrate the potential cost this entails against the risks intended to be avoided. Attempting to absolutely neutralize all risks in banking activity is only possible if lending activity—its very raison d’être—disappears. Banks are fundamental to financing today’s growth and making it sustainable in the future.
The IMF calls on authorities to remain alert to risks that may arise with the evolution of the financial system beyond banks. From fintech to cybersecurity, the development of shadow banking, and the potential excesses derived from an exceptionally expansionary monetary policy that has been prolonged over time. Authorities must focus their decisions correctly to combat potential risks and minimize the possibility of contagion to the rest of the financial system if they materialize. It is essential to preserve the stability achieved by the banking system.
Authorities must always evaluate risks and calibrate the appropriate decisions to mitigate them. Confidence derived from good management, in a context of high transparency and international coordination, will be key to avoiding a new period of financial instability in the future.
