IMF maintains $1-trillion loss forecast for credit crisis

July 28th, 2008 - 11:54 pm ICT by IANS  

DPA
Washington, July 28 (DPA) The International Monetary Fund Monday stood by its prediction of a $1-trillion total loss for financial institutions stemming from the one-year-old credit crisis in the US - more than double the writedowns reported by banks and mortgage lenders to date. Warning that there was “no bottom” in sight for the housing downturn at the centre of the ongoing turmoil, the IMF, in an update of an April report on financial markets, said banks had done well to raise extra capital in the current environment.

Banks had already acknowledged much of their expected losses from the financial turmoil, reporting more than $400 billion in writedowns since August 2007.

But the IMF said it saw “little reason” to change its April estimate that total losses would reach $1 trillion before the crisis comes to an end.

“Credit risk remains elevated. Further raising of capital may be needed,” in some financial institutions, said Jaime Caruana, director of the IMF’s Monetary and Capital Markets Department.

Caruana added that he saw no significant signs that the weak housing market which sparked the current financial turmoil was set for a turnaround.

Plunging housing prices since early 2007 have led to more than a million foreclosure filings by US homeowners, which in turn has led banks and lenders to sharply devalue their mortgage-related assets.
DPA

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