Debt crisis has upped European banks' risks by €300 billion: IMF
21 Sep 2011
Europe's debt crisis has increased the risk exposure of banks in the region by €300 billion and they needed recapitalisation to ensure they could bear potential losses, the International Monetary Fund said today.
In its Global Financial Stability Report, the IMF said it sought to "approximate the increase in sovereign credit risk experienced by banks over the past two years,"
The report, however, did not go into the capital needed, which, according to the IMF, would have to be determined by fully fledged stress tests to identify balance sheet assets, income or losses.
Earlier this month, IMF managing director Christine Lagarde faced criticism from European officials over her call for a mandatory recapitalisation of Europe's banks.
According to earlier news reports, the IMF had identified a €200 billion shortfall in European bank capital. However, European officials insisted the figure was off the mark, adding that the capital position of most banks in the region was solid.
European officials chose to go along with the results of banks' stress tests that were conducted in July. The results found capital deficits in only eight banks and an aggregate shortfall of only €2.5 billion, a figure widely criticised as too low and politically skewed.
The IMF's report today made it clear that the €200 billion figure was not a hard measure of a capital shortfall.
