By David Lawder
WASHINGTON (Reuters) -The International Monetary Fund is urging countries to pay more attention to risks that may be building in non-bank lending markets after the collapse of two U.S. automotive firms, IMF Managing Director Kristalina Georgieva said on Thursday.
Georgieva told a news conference during the IMF and World Bank annual meetings in Washington that non-bank financial institutions are less regulated than traditional banks and may be more susceptible to a buildup of risks.
Continued growth of those risks could ultimately put the global economy in a "difficult place," she said.
The bankruptcies last month of auto parts maker First Brands and subprime car lender Tricolor, which relied on private credit markets for financing, have raised concerns about excesses in Wall Street's multi-trillion dollar credit machinery. "When you see one cockroach, there are probably more, and so everyone should be forewarned of this one," JPMorgan CEO Jamie Dimon said during an earnings call on Tuesday.
Georgieva said she was not ready to warn of a systemic crisis, but called for vigilance by regulators and finance ministries.
"Whether that kind of problem can be more dramatic, of course, depends on two things. It depends on the performance of the real economy, and it depends on the magnitude of non-banking financial institutions that find themselves in a tough spot, and this is why we are urging more attention to these non-bank financial institutions," Georgieva said.
Since the global financial crisis of 2008-2009, central banks in systemically important countries have massively built up reserves, while the dollar's reserve status gives the U.S. strong liquidity buffers, she said, putting the world in much better shape to deal with any credit market turbulence.
"We are not where we were at the time of the global financial crisis. Lessons have been learned. Actions have been taken," she said.
But Georgieva said countries have largely exhausted their fiscal buffers since the COVID-19 pandemic, leaving less room to respond quickly to any economic fallout.
"We are very watchful on developments so far," she said. "So far, not that many cockroaches."
(Reporting by David Lawder; Additional reporting by Andrea Shalal Editing by Chizu Nomiyama and Paul Simao)
