Only hours after First Republic Bank was saved by JPMorgan Chase, International Monetary Fund Managing Director Kristalina Georgieva stated on Monday that she anticipates more banking sector weaknesses to be revealed.

Speaking in Beverly Hills, California at the 2023 Milken Institute Global Conference, Georgieva began by addressing the major issue of the day—the financial crisis that has been worrying investors for weeks.

She warned that the suffering might not be finished and that the abrupt change from low to significantly higher interest rates contributed to exposing flaws at some banks.

“It doesn’t mean that we have a free pass,” she said. “It doesn’t mean that there wouldn’t be more vulnerabilities to come.” Investors have said on the sidelines of the conference that they are worried more drama could lie ahead as investors could target other smaller vulnerable banks.

The IMF applauded the speedy action taken by American regulators to seize First Republic and find a buyer, but it also underlined that the global financial system’s resilience was still being put to the test as pressures were being shown in a variety of institutions and markets.

“Recent events continue to remind us of the challenges posed by the interaction between tighter monetary and financial conditions and the buildup in vulnerabilities in the global financial system,” a spokesperson said.

The IMF last month reduced its forecast for global growth in 2023 as rising interest rates moderated activity, but it also issued a warning that a major escalation of financial system instability may cause output to decline to nearly recessionary levels.

It claimed that robust policy measures taken in the wake of the failure of two American regional banks and the compelled merger of Credit Suisse had successfully reduced contagion risks. However, the unrest added yet another level of uncertainty on top of the persistently high inflation rate and the fallout from Russia’s conflict in Ukraine.

Georgieva noted that the most notable aspect of the most recent rescue was how quickly deposits left First Republic, and she attributed the quickness in part to the influence of social media.

She did, however, give regulators praise and stated that she anticipates “new regulatory and disclosure thinking around how we deal with this.”

(Adapted from Bloomberg.com)