The International Monetary Fund has lowered its estimate for global writedowns for banks and other financial institutions. Easing financial and economic strains have led the Washington D.C.-based organization to cut its estimate of global banking writedowns from the financial crisis back down to $2.3 trillion from $2.8 trillion.
The IMF however, pointed out in its Global Stability Report that some segments of country banking systems remain poorly capitalized and still face significant downside risks.
“Slow progress on addressing weak banks could complicate policy exits from extraordinary support measures. The failure to deal decisively with weak institutions could act as a deadweight on growth”, the report said.
The report also addresses sovereign debt situation. It says : “recently, spreads have widened in some highly indebted economies with underlying vulnerabilities, as longer-run fiscal sustainability concerns have telescoped into strains in sovereign funding markets that could have cross border spillovers. The subsequent transmission of sovereign risks to banking systems and feedback through the economy could undermine financial stability.” In other words, what they are implying is that the debt problems in Greece could spell more trouble for the entire Eurozone.
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