Still feeble banks are the global economy's "Achilles heel", the IMF warned yesterday as it advised governments to make "the timing of planned withdrawal of some monetary and financial support more contingent on improved bank health".
In its latest Global Financial Stability Report, the fund says progress to restore stability has suffered a setback, with markets still "sensitive to negative surprises".
"Nearly $4 trillion (£2.5trn) of bank debt will need to be rolled over in the next 24 months," the IMF said. "Planned exit strategies from unconventional monetary and financial support may need to be delayed until the situation is more robust, especially in Europe. With the situation still fragile, some of the public support that has been given to banks in recent years will have to be continued."
The Bank of England's special liquidity scheme and the Treasury's credit guarantee scheme have provided about £300bn to aid funding; both will be wound up over the next two years. In all, UK banks need to raise some £800bn over this period.
Jose Vinals, the director of the IMF's Capital Markets Department, said banks were the "Achilles heel of the recovery" because of "unfinished repairs to bank balance sheets". Write-downs in the EU and US are down from $2.3trn in April to $2.2trn; 75 per cent of these losses have been realised.