IMF lowers global loss estimates due to financial crisis to $3.4 trillion

The International Monetary Fund (IMF) has revised downward the projected looses to banks and financial institutions in the three years to 2010 by $600 billion to $3.4 trillion as "the world economy grows faster than previously expected."

"For both banks and other financial institutions, the potential write-downs from bad assets such as loans and securities have fallen by some $600 billion over the past six months - from about $4 trillion to $3.4 trillion - as a lessening in financial stress has narrowed spreads," the IMF said in its half-yearly Global Financial Stability Report presented in Istanbul today.

Although write-down estimates are subject to considerable uncertainty, the analysis shows that the financial system is on the mend, the report said.

IMF said concerted efforts by governments and central banks to deal with the crisis and fledgling signs of a global economic recovery have helped limit the losses.

Nevertheless, it said, banks still confront substantial challenges. While commercial banks are estimated to have already recognised $1.3 trillion through the first half of 2009, they still face another $1.5 trillion of potential asset write-downs ahead, it warned.

Overall, banks have recognised slightly less than half of their expected losses. US banks have recognised slightly more than those in the United Kingdom and the euro area, it noted.