IMF: $1.5 TRILLION Coming In Further Bank Writedowns

Not that the market seem particularly concerned about bank health, but the IMF, in its latest Global Financial Stability Report, throws out the number $1.5 trillion for how much more debt banks have yet to write down, a large chunk of which will come from (non-UK) Europe.

However, this masks, somewhat the real issue, which is writedowns as a percentage of the banking system.

Says the IMF:

Comparing the overall size of total expected writedowns to the size of each region’s banking
system, cumulative loss rates show larger proportionate losses in U.S. and U.K. banks compared to
the euro area. Despite improvements in securities pricing since April 2009, substantial additional
writedowns lie ahead. This is because banks globally are expected to incur further potential
writedowns on their loan portfolios. Loan losses are expected to account for around two-thirds of
total writedowns over 2007–10. The residential sector is the main driver of loan losses for U.S.
banks. In contrast, foreign loans are a large contributor to loan losses for U.K. and euro area banks.
This is, in part, due to higher loss rates on foreign lending and, in the case of the United Kingdom, a
larger share of foreign loans in the portfolio.


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