IMF expects toxic debt writedowns this year and next

by Gill Montia

Story link: IMF expects toxic debt writedowns this year and next

In its latest Global Financial Stability Report, the International Monetary Fund (IMF) warns that US financial institutions are only halfway through writing down credit crisis losses on toxic debt, while in Europe the process has not even reached the mid point.

The body estimates the figure could reach $4.1 trillion globally and suggest financial institutions, particularly banks, need to raise more cash to bolster their capital strength and restore confidence.

Global write-downs for loans and securities held by banks are expected to hit $2.8 trillion, in which case only around one-third has so far been taken into account.

Turning to the US, the IMF expects losses from toxic assets to exceed the $2.2 trillion forecast in January and reach $2.7 trillion.

Meanwhile in the UK, which has seen write-downs of $110 billion to date, the report predicts a further $200 billion in write-downs this year and next.

However, today the Fund has admitted to an error in its UK related calculations, which have been challenged as being too pessimistic.

It is currently reconsidering the figures.