Financial institutions face losses of $4,100bn as the global recession erodes the value of their loans and other assets, the International Monetary Fund yesterday said as it urged governments to take “bolder steps” to shore up institutions, including nationalising them where necessary.
In its Global Financial Stability Report, the IMF said many loans on institutions' balance sheets were falling in value, not just the toxic subprime securities that triggered the crisis. Total writedowns on US assets would reach $2,700bn (€2,082bn, £1,837bn), the IMF estimated, up from the $2,200bn it estimated in January and almost double its forecast of last October. Including loans originated in Japan and Europe, the writedowns would hit $4,100bn.
Banks would bear two-thirds of the losses, it said, with insurance companies, pension funds, hedge funds and others taking the rest.