IMF Flags Systemic Sovereign-Debt Exposures, New Doom Loop

The IMF’s new assessment of global markets includes a very troubling finding:  the doom loop is reverberating in several systemically significant nations.  Although the report seemingly targets emerging markets, its chart combining nations with high sovereign debt and domestic banks with large national sovereign-debt holdings includes India, Brazil, Argentina, Mexico, as well as several smaller nations.  Countries in which domestic banks have large sovereign-debt exposures relative to capital include Hungary, Poland, Turkey, Brazil, Thailand, India, and seven others.

IMF Panel Highlights Disagreements on CBDC Designs

At a session today on cryptoassets and CBDC during the IMF annual meetings, Managing Director Georgieva noted that the future of money was virtual, but emphasized that the need for interoperability, agile regulation, and protections against money laundering and terrorism pose the biggest barriers for governments.  Three government officials actively engaged in this arena also spoke, making it clear that broader disagreements create challenges for many cross-border aspects of digital innovation.  Roberto Campos Neto, the President of the Brazilian Central Bank, endorsed retail CBDC as a tool to increase inclusion along with payment speed and security, a point echoed in a recent BIS CBDC analysis (see Client Report CBDC11).