Print
Email
Share
Cite
The 2010 edition of this annual IMF report states,
"With the global economy improving...risks to financial stability have subsided. Nonetheless, the deterioration of fiscal balances and the rapid accumulation of public debt have altered the global risk profile. Vulnerabilities now increasingly emanate from concerns over the sustainability of governments’ balance sheets. In some cases, the longer-run solvency concerns could translate into short-term strains in funding markets as investors require higher yields to compensate for potential future risks. Such strains can intensify the shortterm funding challenges facing advanced country banks and may have negative implications for a recovery of private credit. These interactions are covered in Chapter 1 of this report.
Banking system health is generally improving alongside the economic recovery, continued
deleveraging, and normalizing markets. Our estimates of bank writedowns since the start of the crisis through 2010 have been reduced to $2.3 trillion from $2.8 trillion in the October 2009 Global Financial Stability Report. As a result, bank capital needs have declined substantially, although segments of banking systems in some countries remain capital deficient, mainly as a result of losses related to commercial real estate. Even though capital needs have fallen, banks still face considerable challenges: a large amount of short-term funding will need to be refinanced this year and next; more and higher-quality capital will likely be needed to satisfy investors in anticipation of upcoming more stringent regulation; and not all losses have been written down to date. In addition to these challenges, new regulations will also require banks to rethink their business strategies. All of these factors are likely to put downward pressure on profitability."
