IMF sees global subprime losses rising to $2.7 tril.+

WASHINGTON, April 21 Kyodo -
The International Monetary Fund said Tuesday it now expects financial
institutions around the globe to suffer combined losses of $2.7 trillion from
the financial market crisis resulting from the U.S. subprime mortgage meltdown.

In its twice-yearly Global Financial Stability Report, the IMF said the
ballpark figure is up from the $2.2 trillion estimate in the revision made in
January.
The report was released ahead of a series of high-profile international
financial talks in Washington this weekend, including Friday's meeting of Group
of Seven finance ministers and central bankers.
''As a result of continued pressures in credit markets, global financial
institutions and other holders could face larger potential write-downs,'' the
report said.
''Expected write-downs have risen to some $2.7 trillion, up from the $2.2
trillion estimated at our interim update in January 2009, and from the $1.4
trillion estimated in October 2008,'' it said.
In the latest report by the Washington-based institution, estimates for
write-downs have been extended to include other mature market-originated
assets. They suggest write-downs could amount to a total of around $4 trillion,
about two-thirds of which would be incurred by banks.
The report said the global financial system ''remains under severe stress'' as
the crisis hits households, corporations and the banking sectors in both
advanced and emerging market countries.
''Shrinking economic activity has put further pressure on banks' balance sheets
as asset values continue to degrade, threatening their capital adequacy and
further discouraging fresh lending. Thus, credit growth is slowing, and even
turning negative, adding even more downward pressure on economic activity,'' it
said.
While acknowledging that substantial private-sector adjustment and public
support packages are contributing to some early signs of stabilization, the
report called for ''further decisive and effective policy actions and
international coordination'' to normalize market conditions.
It also pointed out that policies aimed at bringing the financial sector back
to stability will be more effective if they are reinforced by appropriate
fiscal and monetary policies.
''Fiscal stimulus to support economic activity and limit the degradation of
asset values should improve the creditworthiness of borrowers and the
collateral underpinning loans, and combined with the financial policies to
bolster banks' balance sheets, would enable sound credit extension,'' the
report said.
The gathering of the G-7, which groups Britain, Canada, France, Germany, Italy,
Japan and the United States, will be followed by IMF-World Bank meetings on
Saturday and Sunday.
==Kyodo
2009-04-21 22:07:54