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IMF Warns of Risks to Eurozone Banks

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IMF Warns Of Risks to Eurozone Banks

According to the FT, the IMF has warned that unless the Eurozone resolves the debt crisis, the region’s banks may need to review their capital structures.

In its semi-annual check on the world’s financial health, the Fund said the euro area’s debt crisis was a key threat and the risks to global financial stability had risen in the last six months leaving confidence “very fragile.”

The IMF says that unless the crisis is resolved, banks may need to sell as much as $4.5T of assets, or more than 7% of their balance sheets, through 2013. This figure represented an 18% increase from the fund’s previous estimate in April.

“Despite many important steps already taken by policymakers, this agenda remains critically incomplete, exposing the euro area to a downward spiral of capital flight, breakup fears and economic decline,” the IMF said in its report on Wednesday.

The IMF also said that such deleveraging would weigh on growth and add to increasingly high unemployment in the region.

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About the Author

David Moenning is a the Chief Investment Officer at Heritage Capital Management. Dave is also the proprietor of StateoftheMarkets.com, which provides free and subscription-based portfolio services. Dave began his investment career in 1980 and has been an independent money manager since 1987. Thus, Dave has been live on the firing line and investing for a living for more than 25 years.