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Wednesday, April 21, 2010

IMF: Writedowns and Provisions Lower Globally

In April 2010, the International Monetary Fund’s Global Financial Stability Report stated that the health of the global financial system has improved, since the IMF released its previous report in October 2009. The IMF estimates that total global bank writedowns and loan provisions between 2007 and 2010 have fallen by $500 billion from $2.8 trillion in October 2009 to $2.3 trillion in April 2010. Approximately two-thirds or $1.5 trillion of loan writedowns had been realized by the end of 2009.

For U.S. banks, estimated loan writedowns and provisions for 2007–2010 were revised downward by $66 billion to $588 billion. The IMF attributed the improvement to the stabilizing of housing values in the second half of 2009 and the U.S. economic recovery. The IMF also lowered its estimate on the writedown of U.S. banks’ securities portfolio from $371 billion in October 2009 to $296 billion as of April 2010. As a result, the implied cumulative loss rate for the loan and securities portfolios of U.S. banks dropped from 8.2% in October 2009 to 7% in April 2010.

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