Although the International Monetary Fund on Tuesday gave an optimistic report about the world's financial system some of the dark clouds on the horizon included worries about the impact of a potential bird-flu pandemic.
A global avian flu outbreak in humans could cause high absenteeism in the financial industry, interfering with payments, clearing, settlements, trading and communications, the IMF warned in its periodic evaluation of the international finance systems, the Global Financial Stability Report.
In addition, the IMF noted that rising interest rates and tighter credit for the corporate and private sectors might have "somewhat" increased medium-term risks to financial stability in the last six months.
Elsewhere on the financial scene, the good news seemed to counterbalance concerns, and any cyclical uncertainties for financial markets in 2006 could be defined as "not bad, but not as good as the stellar year 2005," the IMF said.
Concerns over bird flu, which has killed 109 people over the last few years but not made the feared leap to a human epidemic, prompted the IMF to urge large financial institutions to plan "for work from home, heavy demand for cash by the public and transport of key personnel whose functions cannot be done from home."
"The outbreak of avian flu could threaten global financial markets," the IMF warned. It could also lead to a "significant but temporary reduction" in net capital flows to emerging economies, the IMF said.
The IMF urged countries that do not yet have bird-flu plans for their financial systems to establish emergency committees that include central bank officials.
The report was based in part on informal discussions with commercial and investment banks, securities firms, asset management companies and other elements of the world financial system.
In other conclusions from the report, the IMF said: Financial systems have strengthened in emerging markets, attracting a 41 percent increase in direct investments last year over 2003. That increase applied to emerging Europe, Central Asia, Asia and Latin America. In 2004 alone, $180 billion flowed to emerging markets.
"The centre of gravity of growth in financial services continues to shift toward the large and rapidly growing economies of India and China," the IMF said.
The organisation warned that there were risks in the rapid growth of private credit in "a number of Southeast Asian countries" and in the dominance of state-owned banks in India and China.
In the Middle East, Central Asia and Africa, high commodity prices were driving developments, and the IMF warned that a sharp reversal in oil prices "could have adverse effects on the financial systems in some of these countries."
Further hikes in oil prices could "create headwinds in financial markets" by pushing up interest rates, slowing growth and putting downward pressure on equity markets, the IMF warned.