30
Sep
IMF cuts crisis losses prediction
The International Monetary Fund (IMF) has cut its forecast for
the amount likely to be written off globally in bad loans and
investments by 15%.
The total it expects banks to lose between 2007 and 2010 has
been cut to $3.4tn (£2.1tn) from $4tn.
The IMF said the change was made because the world economy was
growing faster than had been expected.
But it has warned that the improvement should not be taken as an
excuse to delay necessary financial reforms.
Its Global Financial Stability Report said that risks to the
global financial system had subsided as a result of interventions
by governments and central banks, as well as signs of a global
recovery.
Not strong enough
"We are on the road to recovery, but this does not mean that
risks have disappeared," said Jose Vinals from the IMF.
Its report also warned that banks overall had recognised
slightly less than half of their losses, with US banks more
advanced in the process than their counterparts in the UK and the
eurozone, meaning there is still a great deal of bad news to
come.
It said that bank balance sheets had been stabilising, but that
banks were not yet in a strong enough position to support the
economic recovery.
It based this on the prediction that even the growing earnings
expected from banks in the next 18 months would not be enough to
offset the amount they would have to write off because of bad loans
and investments.
The report is published the day before the IMF's World Economic
Outlook, which is expected to revise upwards its forecast for
global economic growth in 2010 from 2.5% to 3%.
The IMF warned of the dangers of complacency as signs of
economic recovery emerge.
It called on governments to press ahead with reforming their
financial systems, including:
Forcing banks to keep more cash in reserve
Widening regulation to all institutions which could threaten
economies if they failed and making sure they are paying for the
risks that they take
Coming up with regulatory systems that are unaffected by the peaks
and troughs of the economic cycle
Improving international co-operation to help deal with businesses
that operate globally
source: www.bbc.co.uk/news Wednesday 30th
September 2009