WASHINGTON (Dow Jones)--The International Monetary Fund issued a dire warning about the poor state of Europe's banks Thursday, just a day before officials plan to release details on how well banks there are suited to withstand financial shocks.
The IMF said Europe's banks remain insufficiently funded and it is "critically important to put in place and immediately publicize credible plans" to deal with failing banks.
The comments are made in a paper prepared for a meeting of deputy ministers from the Group of 20 nations last week, but published by the IMF Thursday.
The fund also called the risks of not resolving the Greek crisis "severe" and said "a greater sense of urgency is needed to address the crisis and reduce the risks of contagion." European officials are still negotiating exactly how it plans to finance a EUR104 billion funding gap for Athens. Uncertainty, exacerbated by political divisions within the euro zone, is continuing to roil Europe's sovereign debt markets. The crisis is now threatening to target one of the continent's largest economies, Italy.
The fund said the coming stress tests from the European Banking Authority represent an important opportunity for updating risk assessments in the European banking system and for addressing weak banks.
Despite efforts to raise capital ahead of the stress tests, "capitalization of banks in Europe remains relatively low," especially compared with U.S. banks, it said.
Furthermore, banks across the euro area and elsewhere are lagging behind in securing funding for 2011, the IMF said. "This is making them vulnerable to a further tightening in funding conditions, underscoring the importance for stepping up the pace at which they roll over maturing funding, since rollover needs remain substantial despite the ongoing deleveraging," it said.
Progress on strengthening and repairing the financial sector has been too slow, the fund told the G-20, adding that "policy initiatives are urgently needed to make financial systems resilient to new systemic shocks."
Source: http://online.wsj.com
The IMF said Europe's banks remain insufficiently funded and it is "critically important to put in place and immediately publicize credible plans" to deal with failing banks.
The comments are made in a paper prepared for a meeting of deputy ministers from the Group of 20 nations last week, but published by the IMF Thursday.
The fund also called the risks of not resolving the Greek crisis "severe" and said "a greater sense of urgency is needed to address the crisis and reduce the risks of contagion." European officials are still negotiating exactly how it plans to finance a EUR104 billion funding gap for Athens. Uncertainty, exacerbated by political divisions within the euro zone, is continuing to roil Europe's sovereign debt markets. The crisis is now threatening to target one of the continent's largest economies, Italy.
The fund said the coming stress tests from the European Banking Authority represent an important opportunity for updating risk assessments in the European banking system and for addressing weak banks.
Despite efforts to raise capital ahead of the stress tests, "capitalization of banks in Europe remains relatively low," especially compared with U.S. banks, it said.
Furthermore, banks across the euro area and elsewhere are lagging behind in securing funding for 2011, the IMF said. "This is making them vulnerable to a further tightening in funding conditions, underscoring the importance for stepping up the pace at which they roll over maturing funding, since rollover needs remain substantial despite the ongoing deleveraging," it said.
Progress on strengthening and repairing the financial sector has been too slow, the fund told the G-20, adding that "policy initiatives are urgently needed to make financial systems resilient to new systemic shocks."
Source: http://online.wsj.com
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