Banks face $3.6 trillion in maturing debt: IMF

WASHINGTON: The world's banks face a $3.6 trillion "wall of maturing debt" in the next two years and must compete with debt-laden governments to secure financing, the IMF warned on Wednesday. Many European banks need bigger capital cushions to restore market confidence and assure they can borrow, and some weak players will need to be closed, the International Monetary Fund said in its Global Financial Stability Report.

The debt rollover requirements are most acute for Irish and German banks, with as much as half of their outstanding debt coming due over the next two years, the fund said. "These bank funding needs coincide with higher sovereign refinancing requirements, heightening competition for scarce funding resources," the IMF said.

Overall, the IMF said global financial stability has improved over the past six months. The most pressing challenges in the coming months will be funding of banks and sovereigns, particularly in vulnerable euro area countries, it said. The IMF and European Union bailed out Greece and Ireland, and are in talks with Portugal on a lending program as sovereign borrowing costs surge. Many investors have questioned whether Spain can avoid a similar fate, but the IMF said Spanish authorities were taking the right steps to address the country's debt problems.

"The actions that have been taken in Spain recently have managed to decouple, in the views of markets, the fortunes of Spain relative to those of Portugal" and Ireland, said Jose Vinals, director of the IMF's Monetary and Capital Markets Department . European banks hold large amounts of euro zone sovereign debt, making them vulnerable to losses if countries are forced to restructure.

Source: EconomicTimes