The global financial system is being tested by higher inflation and interest rates, the International Monetary Fund (IMF) said Tuesday.
"The global financial system is showing considerable strains as rising interest rates shake trust in some institutions," it said in a statement.
About the recent U.S. banking crisis, the IMF said, "High interest rates have led to large losses in these banks' securities portfolio" and added "It's not 2008" referring to the global financial crisis 15 years ago.
"While the banking turmoil has raised financial stability risks, its roots are fundamentally different from those of the global financial crisis. Before 2008, most banks were woefully undercapitalized by today's standards, held far fewer liquid assets, and had much more exposure to credit risk," it said.
"The recent turmoil is different. The banking system has much more capital and funding to weather adverse shocks, off balance sheet entities have been unwound, and credit risks have been curbed by more stringent post-crisis regulations," it added.
The IMF said persistently high inflation continues to cause losses on banks' assets.
It said investors are pricing a fairly optimistic scenario and expect inflation to decline without much more increases in interest rates by the central banks, and added: "While market participants see recession probabilities as high, they also expect the depth of the recession to be modest."
