IMF puts global losses at $4.7 trillion

CANBERRA - The International Monetary Fund (IMF) estimates losses resulting from the global financial crisis stand at a mammoth US$3.4 trillion ($4.7 trillion) for the 2007-10 period, despite some improvement in the world's banking system.

Rising share prices have helped to trim losses in the past six months by an estimated US$600 billion, it says.

Releasing its latest Global Financial Stability Report in Istanbul yesterday, the IMF said this modest improvement to the outlook had also been helped by the unprecedented actions of policymakers and signs of economic recovery.

"Still, overall risks remain elevated and the risk of reversal remains significant," the IMF said in its six-monthly report.

It said financial institutions continued to face three main challenges - rebuilding capital, strengthening earnings and weaning themselves off government funding support.

While writedowns by financial institutions have begun to "taper", credit deterioration will continue to lead to higher loans losses over the next few years.

The IMF estimates realised bank writedowns of loans and securities between mid-2007 and mid-2009 amounted to US$1.3 trillion, and that a further US$1.5 trillion will be wiped off books by the end of 2010.

"While the capital positions and outlook for banks have improved significantly ... earnings are not expected to fully offset forthcoming writedowns," it said.

The Reserve Bank of Australia in its own Financial Stability Review released earlier this month said Australia's banks had proved resilient during the crisis and are well-positioned for a rebound.

- AAP