IMF: Bank financing needs to hit $5trn

City A.M. Reporter
GLOBAL banks will face $5 trillion in refinancing needs over the next 36 months, a senior International Monetary Fund (IMF) official said yesterday.

“The funding pressures that banks are going to be facing over the next couple of years have to do with the fact that during the crisis banks had to issue shorter-term debt. This debt is now coming to maturity,” Jose Vinals, director of the IMF’s monetary and capital markets department, said.

His comments came as the IMF?warned concern over public debt could prolong the credit crisis although Greece is a special case and should not be compared to other eurozone members.

The IMF said the health of the global financial system had improved alongside a fragile recovery in the world economy, but that investors’ nerves over rising levels of public debt could undermine stability gains made so far.

“Advanced country sovereign risks could undermine stability gains and take the credit crisis into a new phase,” the IMF said in an update of its Global Financial Stability Report.

The IMF said there was a danger that deteriorating sovereign credit risk could quickly spill over to domestic banking systems and feed through into the real economy, triggering fresh financial instability.

The concern is that investors will demand higher interest rates to buy government debt, driving up borrowing costs for both the public and private sector.

Questions over Greece’s ability to finance a national debt greater than its annual economic output has shaken confidence in the country, forcing the government to seek talks with the IMF and European Union that could lead to a bailout.

Jose Vinals, director of the IMF’s monetary and capital markets department, said the IMF was not indicating another crisis was imminent. “We’re saying that as a result of the crisis, the accumulation of public debt has been significant and there is concern now in the market with sovereign risk,” he said.