International Monetary Fund experts say the risks of financial instability have risen in wealthy nations, and remain high in emerging markets.

Jose Vinals, a senior IMF official, told journalists Wednesday that recent market turmoil reflects faltering growth, rising uncertainty and falling confidence among investors and others.

He said financial markets have recovered much of the ground lost early this year, but he calls that a warning that work needs to be done, not a sign that the danger has passed.

According to Vinals, bad loans are hurting economies around the world. He urged banks to develop a comprehensive strategy to cope with these issues.

He urged European banks to also make some long-overdue reforms, adding that emerging economies have been hurt by falling commodity prices, raising risks to banks in those areas.

China in transition

Meanwhile, China is navigating the complex transition to a more market-based financial system. Vinals says in spite of some economic reforms, the health of Chinese companies is "deteriorating." Weak corporate earnings make it harder to repay loans to Chinese banks, which he says could result in a huge number of bad loans, perhaps equal to 7 percent of GDP. Vinals calls the burden "manageable" and says China's leaders are aware of the problem and are working to solve it.

He spoke as economic policymakers from around the world are gathering in Washington for meetings of the IMF, World Bank, and G-20. Many of these leaders have tried to boost economic growth by cutting interest rates. Vinals said they also need to make careful use of government spending and reformed financial regulations to increase economic expansion and the jobs it creates.

IMF: Financial Stability Risks Up in Advanced Economies