Banks set to lose trillions
(3 February 2009 – Global) An International Monetary Fund (IMF) report has revealed that global banking industry losses may reach US$2.2 trillion (A$3.32 trillion) due to the current financial crisis.
A report by the IMF said that the worsening credit conditions affecting a broader range of markets have raised their estimate of the potential deterioration in US-originated credit assets held by banks and others companies.
The huge increase in potential asset deterioration is a significant upgrade on the IMF’s last estimate of $US1.4 trillion ($A2.11 trillion).
Deterioration has occurred in the areas of corporate and commercial real estate securities as well as the loan books of banks, reflecting the weakening outlook for the economy.
While banks have received capital injections and government bailouts, the IMF said that, going forward, banks will need even more capital as expected losses continue to mount.
The shortfall in capital could amount to at least a half a trillion dollars in the US and Europe alone.
This implies that for US and European banks such an amount in new capital is necessary just to prevent their capital position from deteriorating further, the report said.
The IMF also recently released a report which said that global growth is expected to fall to just half a percent in 2009. Collectively, advanced economies are expected to contract by 2 percent in 2009, the first annual contraction in the post war period.
The huge increase in potential asset deterioration is a significant upgrade on the IMF’s last estimate of $US1.4 trillion ($A2.11 trillion).
Deterioration has occurred in the areas of corporate and commercial real estate securities as well as the loan books of banks, reflecting the weakening outlook for the economy.
While banks have received capital injections and government bailouts, the IMF said that, going forward, banks will need even more capital as expected losses continue to mount.
The shortfall in capital could amount to at least a half a trillion dollars in the US and Europe alone.
This implies that for US and European banks such an amount in new capital is necessary just to prevent their capital position from deteriorating further, the report said.
The IMF also recently released a report which said that global growth is expected to fall to just half a percent in 2009. Collectively, advanced economies are expected to contract by 2 percent in 2009, the first annual contraction in the post war period.
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