The IMF has calculated that global losses from the financial crisis could rise to $4 trillion. While some are already talking about recovery and others promoting “glimmers of hope”, the IMF warned that “the challenges to restoring financial stability remain significant”, in its semiannual Global Financial Stability Report (GFSR) released Tuesday.
In its latest report, the I.M.F. estimated that banks and other financial institutions faced aggregate losses of $4.05 trillion in the value of their holdings as a result of the crisis.
Of that amount, $2.7 trillion is from loans and assets originating in the United States, the fund said. That estimate is up from $2.2 trillion in the fund’s interim report in January, and $1.4 trillion last October.
The IMF also slammed any cheers in recently found market optimism, pointing out that in spite of ““some improvements in short-term liquidity conditions and the opening of some term funding markets, other measures of instability have deteriorated to record or near-record levels.”
The report goes on to stressing the importance of the banking system to: “cleanse them of impaired assets” but warns that “potential writedowns, including about $1 trillion already taken, could be nearly $4.1 trillion on some $58 trillion of assets originated in the United States, Europe, and Japan (although the owners of these assets can be anywhere in the world)”.
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