IMF urges banks to raise capital
(23 September 2011 – Global) The International Monetary Fund (IMF) said the European banks face potential losses of about €300 billion (A$405 billion) and urged banks to raise capital to protect the global economy from more turmoil.
The fund said fiscal strains emanating from weaker euro-zone members have had a direct impact of about €200 billion on banks in the European Union since its debt crisis started last year.
In addition to the holdings of government debt, lower bank asset prices raised credit risks between banks for an overall hit of €300 billion.
The IMF cautioned that the figure - based on recent market measures - doesn't necessarily represent the size of a capital hole at European banks, saying such an assessment would require a closer examination of bank balance sheets.
But in a report ahead of its annual meeting, it used the calculation to stress the importance of increasing bank capital buffers.
The IMF said the global credit crisis 'has moved into a new, more political phase' as governments struggle to get their finances in order and larger European nations debate how to rescue their neighbours.
The latest turmoil in the euro zone, the US debt-rating downgrade and capital shortfalls at banks have renewed threats to financial stability around the world as global growth slows, the fund said.
'Time is running out to address existing vulnerabilities,' the IMF said in its Global Financial Stability Report.
'The set of policy choices that are both economically viable and politically feasible is shrinking as the crisis shifts into a new, more political phase.'
In addition to the holdings of government debt, lower bank asset prices raised credit risks between banks for an overall hit of €300 billion.
The IMF cautioned that the figure - based on recent market measures - doesn't necessarily represent the size of a capital hole at European banks, saying such an assessment would require a closer examination of bank balance sheets.
But in a report ahead of its annual meeting, it used the calculation to stress the importance of increasing bank capital buffers.
The IMF said the global credit crisis 'has moved into a new, more political phase' as governments struggle to get their finances in order and larger European nations debate how to rescue their neighbours.
The latest turmoil in the euro zone, the US debt-rating downgrade and capital shortfalls at banks have renewed threats to financial stability around the world as global growth slows, the fund said.
'Time is running out to address existing vulnerabilities,' the IMF said in its Global Financial Stability Report.
'The set of policy choices that are both economically viable and politically feasible is shrinking as the crisis shifts into a new, more political phase.'
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