Wednesday, April 13, 2011

Banks facing $3.6 trillion 'wall of maturing debt', IMF warns

Debt-laden banks are the biggest threat to global financial stability and they must refinance a $3.6 trillion "wall of maturing debt" which comes due in the next two years, the International Monetary Fund said in its Global Financial Stability Report.

Many European banks need bigger capital cushions to restore market confidence and help reduce the risk of another financial crisis, according to the IMF's report, published on Wednesday.

Banks around the world are facing a $3.6 trillion "wall of maturing debt" coming due in the next two years, and the rollover requirements are most acute for Irish and German banks, the report said.

"These bank funding needs coincide with higher sovereign refinancing requirements, heightening competition for scarce funding resources," the IMF said.

However the IMF said Spain's efforts to control its budget deficit have increased investor confidence and make it unlikely the country will follow Portugal in calling for a bail-out.

"The actions that have been taken in Spain recently have managed to decouple in the views of markets the fortunes of Spain relative to those of Portugal" and Ireland, said Jose Vinals, director of the IMF's monetary and capital markets department. (read more)