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Warning of Impact Of Sovereign Debt In Balance Sheets Of Banks

Warning of Impact Of Sovereign Debt In Balance Sheets Of Banks International Monetary Fund cut, the size of the US and European banks losses since the beginning of the financial crisis in mid-2007 until the end of this year, $ 100 billion. But he warned that the global financial system still faces serious challenges make him vulnerable to shocks, loss of confidence and its negative effects on finance and credit, especially the economic recovery, despite the gradual improvement achieved in restoring stability ».

He announced a financial advisor, director of money markets and capital in the IMF Jose Vinales, in a press conference yesterday, that the global financial system «became more stable than it was in April last, thanks to the economic recovery, which began mid-2009, but still He faces risks. » He explained that the march had been stability for «setback» following the explosion of the sovereign debt crisis in some of the economies of south and north of the European continent. He Vinales, who presented the results of the report of «stability of the global financial system», one of the important reports discussed by the finance ministers and governors of central banks in the joint annual meetings of the IMF and the World Bank, which kicks off in Washington next Saturday, that «the largest endangered dangers to the stability of the financial system lies in the the impact of the sovereign debt crisis on the balance sheets of banks in crisis countries inside and outside ».

He said in a veiled reference to possession of European and American banks, an important part of the European sovereign debt stalled, that «the sovereign debt market turmoil in Europe highlighted the weaknesses in the public budgets for banks and governments alike, and came as a harsh reminder not in respect of the close links existing between them but also regarding the possible repercussions of this disorder across the border. » He stressed that «reduce the threats to the stability of the global financial system, especially the serious effects of the shocks, the lack of trust in banks and sovereign debt, requires the banks in a number of countries strengthen their capital and improve the quality». He warned that failure to so «banks increases the seriousness of the situation and exacerbate the credit crunch constituting an additional obstacle to economic recovery.» The warning Monetary Fund, despite his assertion that the banking sector has so far been the biggest beneficiaries of the economic recovery, pointing out that the improvement achieved by the stock markets in recent months, reducing US and European banks losses (in addition to Asian banks in Hong Kong, Japan and Singapore) 2.3 trillion dollars in April to $ 2.2 trillion currently.

He pointed out that troubled banks achieved a significant milestone in its initiative represents to write off three-quarters of losses and coverage, ie up to about $ 1.75 trillion, in addition to higher average capitalization rates of the global banking sector to more than 10 percent late last year. He predicted that the gradual improvement to continue in the public budgets of the banks of the continuation of the economic recovery.

And it showed the updated IMF estimates, expectations continued arrival of US banks to share 40 percent of the losses of the crisis, followed by banks in the euro area by 30 percent, then the British banks, which is approaching its share of 20 percent. While the balance is distributed on the banks of Switzerland and the Nordic countries and to a lesser extent Asian banks, as well as Australia and New Zealand.

IMF noted in his report, «the face of US banks in particular a high degree of underlying this time the possibility of aggravation of the mortgage crisis danger». He explained that the real estate market finally regained stability after falling residential property prices by more than 30 percent between the years 2006 and 2009, commercial real estate and the loss of 40 percent of their value. However, the market fundamentals are still fragile foretaste of renewed collapse in prices. But warned emerging economies, one of the most important gains achieved by matching them, thanks to the advanced economies, the financial fundamentals in the hardness and strength of economic growth and prospects, and the magnitude of the investment revenue, including making them more attractive for investment.

This fledgling economies urged to pursue able to avoid the negative effects related to «mutations» the flow of global investment policies.

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