IMF: Banks still rely on $600bn of state support

Tim Wallace
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THE WORLD’S giant banks are still too big to fail and are being propped up by governments to the tune of $600bn (£360bn), the International Monetary Fund (IMF) said yesterday.

That support come in the form of an implicit guarantee – markets expect governments to bail them out if they go bust, keeping their borrowing costs down.

Reforms in the wake of the financial crisis were supposed to put an end to this support. But the IMF said the changes have still not come into full effect.

The problem is biggest in the Eurozone, with implicit guarantees of up to $300bn. But they also come in at up to $110bn in the UK and $70bn in the US.

“Government protection for too-important-to-fail banks creates a variety of problems: an uneven playing field, excessive risk-taking, and large costs for the public sector,” the IMF warned.