"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.
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The IMF said that since issuing its previous report in April, "global financial stability has endured an important test" in the meltdown of the risky US subprime mortgage sector that rocked the global financial system in August.
"Markets are recognizing the extent to which credit discipline has deteriorated in recent years -- most notably in the US nonprime mortgage and leveraged loan markets, but also in other related credit markets," said the 185-nation Washington institution, dedicated to fostering monetary stability and financial stability.
The rapid deterioration in global credit conditions as risk was repriced led to "extraordinary" liquidity injections by a number of central banks to ease market operations, the IMF said.
"The potential conseque