IMF: Emerging markets need to be alert to the risk of non-bank capital volatility.

The International Monetary Fund released the second chapter of the Global Financial Stability Report ahead of schedule on the 7th. The chapter emphasizes that although non-bank financial institutions can provide a large amount of funds to emerging market economies, these institutions are highly sensitive to global risks, with fund volatility significantly higher than traditional banking institutions, posing challenges to emerging market economies. The second chapter of the Global Financial Stability Report typically focuses on structural issues or emerging financial risks in specific areas and is usually released before the full report. The IMF is scheduled to officially publish the latest edition of the Global Financial Stability Report on the 14th. The content of the second chapter released on that day focuses on the risks posed by non-bank financial institutions. The IMF states in the chapter that in recent years, emerging market economies have tended to seek external funds through non-bank channels, but this trend also brings new financial risks. Specifically, in the event of a global shock, non-bank institutions have greater capital volatility, and changes in their investment direction will bring greater vulnerability to emerging market economies. Data shows that since the 2008 international financial crisis, investment inflows into emerging markets have increased 8 times, with a total amount of about $4 trillion, of which 80% was provided by non-bank institutions such as investment funds, hedge funds, pensions, and insurance companies. One of the reasons for this situation is that after the financial crisis, global regulatory reforms restricted the scope of risks that banks could undertake, leading many borrowers to turn to non-bank institutions for financing. The IMF is concerned that non-bank institutions are extremely sensitive to global risk changes and are prone to sudden capital withdrawal when the external environment changes. This will increase external financing pressure on emerging market economies in the short term, raise borrowing costs, trigger currency devaluation, and ultimately hinder economic growth.