Global markets protracted due to U.S. subprime crisis

Tuesday, 25 September 2007, 07:00 Hrs
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Washington: Global markets are likely to go through a protracted adjustment period following the recent financial turbulence triggered by the collapse of the U.S. subprime mortgage market, the International Monetary Fund (IMF) said Monday.

"Downside risks have increased significantly and even if those risks fail to materialize, the implications of this period of turbulence will be significant and far-reaching," the IMF said in its latest Global Financial Stability Report (GFSR).

The turbulence represents the first significant test of innovative financial instruments and markets used to distribute credit risks through the global financial system, with markets recognizing the extent to which credit discipline has deteriorated in recent years, said the report.

The crisis "has caused a re-pricing of credit risk and a retrenchment from risky assets that, combined with increased complexity, has led to disruptions in core funding markets and increased market turbulence in August," the report added.
Source: IANS
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