IMF issues European banking sector warning

11 October 2012

Policymakers need to be more proactive in their efforts to resolve the ongoing eurozone debt crisis.

That is according to the International Monetary Fund (IMF), which has warned officials that problems in the region's banking sector will be exacerbated unless more decisive action is taken sooner rather than later.

In its latest Global Financial Stability Report, the body indicated that delays in tackling the economic bloc's fiscal issues have probably increased the amount of asset deleveraging from banks.

The IMF explained that if this trend is allowed to continue, the supply of credit in the region will carry on being constrained which, in turn, will "reinforce financial and economic fragmentation in the euro area".

Indeed, experts at the institution believe that unless measures are taken urgently, banks across Europe could experience asset shrinkage of between $2.8 trillion and $4.5 trillion by the end of next year.

Jose Vinals of the IMF commented: "Commitment to a clear roadmap on a banking union and fiscal integration are needed to restore confidence."

By Gary Cooper

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development