Because of the loose monetary policy of the central banks, the International Monetary Fund (IMF) has warned of dangers to the stability of the global financial system.
Although low interest rates helped the economy in the short term, the organization said it would present its new Financial Stability Review. However, given low interest rates, institutional investors such as funds, pension funds or insurers are also increasingly taking risks.
Investing in riskier and less liquid assets would lead to "weaknesses" that could have "dire consequences for global financial stability," it said. In some major equity and credit markets, prices are already excessive. Weaknesses in the financial system would increase, posing a medium-term risk to growth. The search for higher returns has also led to exaggerated valuations in some risky markets, it said.
Meanwhile, corporate and sovereign bonds worth around $ 15 trillion are no longer yielding positive returns, according to the IMF. This is problematic, for example, for life insurers in Germany, whose customers continued to expect solid increases in value. As a result, they increasingly invested in investments with lower creditworthiness and longer maturities, according to the IMF. In the case of a crisis, it could therefore come to simultaneous sales.
Corporate debt rises
"Policymakers need to act urgently to address the financial vulnerabilities that could exacerbate the next downturn," the fund said. The US trade conflicts and weaker global growth had once again prompted the major central banks to ease their monetary policy once again.
Even the increased debt of companies sees the organization skeptical. In the event of an economic crisis that is only half as bad as the global financial crisis, about 40 percent of corporate debt in eight major economies - including the US, China and some EU states - could be in jeopardy. According to the IMF, this is about 19 trillion dollars.
The fund sees dangerous weaknesses in the financial system, in particular for financial service providers outside the traditional banks. Since April, the dangers in this part of the financial sector in the US and in the eurozone have risen. The IMF called for the supervision of this part of the financial industry to be stepped up. In addition, the indebtedness of the companies is increasing.
The fund is also worried about growing external debt in emerging markets. If financing conditions suddenly worsen, debt service could become more difficult in these countries. Worldwide political coordination remains crucial. The fund also called for full implementation of global financial regulatory reforms following the financial crisis.