European Banks rejects IMF’s Advice

European Banks rejects IMF’s Advice

European Banks rejects IMF’s Advice. Frankfurt, Germany — European politicians and bankers defended the region’s financial institutions and banks Thursday countering the call of the International Monetary Fund (IMF) that an estimate of 200 billion euros or approximately $290 billion will be needed in new capital, reflecting sovereign debt. Christine Lagarde, IMF Chief, called Saturday the mandatory capitalization of all European banks to prevent a possible world recession.

The call by Lagarde has ignited debates whether European banks need to raise funds in order to withstand an extreme and severe downturn. Aside from the IMF, the International Accounting Standards Board (IASB) also had voiced concern about the economic dilemma to be faced by European banks amid the recent economic slowdown. However, European politicians, regulators and banking associations have opposed the suggestion stating that European banks have all the necessary and sufficient capital to smoothly cope and adjust to the market turmoil and turbulence.

IMF has estimated a total of 200 billion euros shortage in capital for all European banks. The figure was highly rejected by both European policymakers and bankers. A study conducted by J.P Morgan Chase has estimated an 80 billion euro deficit by European banks based on the stress test data. UK banks leads with 25 billion euro deficit, French banks with 20 billion euro shortage while German financial institutions needs 14 billion euros.

Posted by George Daniels on Friday September 02 2011, 2:30 AM EST. Ref: Reuters. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0