IMF: Credit strains persist, losses could deepen

WASHINGTON - THE International Monetary Fund (IMF) said on Tuesday turmoil in credit markets could spread, meaning further losses for US banks, and cautioned that risks to global economic growth had increased.

'Financial markets remain under considerable strain, now compounded by a more worrisome macroeconomic environment, weakly capitalised institutions and broad-based deleveraging,' the IMF said in its assessment of global financial markets.

It estimated that potential write-downs and losses to banks had reached US$945 billion (S$1.3 trillion) by March 2008.

The IMF said threats to global financial stability had increased and potential for spillovers to emerging markets increased through funding channels and trade links.

'Downside macroeconomic risks that are concentrated in the US economy have a significant impact on systemically important financial institutions that may spill over to global markets,' it said.

'Our analysis indicated that a contraction in the supply of private sector credit and market borrowings could bring a significant slowdown in US output growth in the following several quarters,' the IMF said in its Global Financial Stability Report. -- REUTERS

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