The International Monetary Fund has expressed concern about the hit the financial sector worldwide has taken in the past six months from government debt problems in Europe and the weakness of the US property market.
In its semi-annual Global Financial Stability Report the IMF warns about ongoing “significant uncertainty” in the system and said “it remains the Achilles’ heel” of the economic recovery.
The IMF is calling on countries to follow a “credible path to ensure fiscal sustainability” and to clarify regulatory reforms.
It wants the banks to put more effort into cleaning up their still somewhat toxic balance sheets and is concerned about the 2.9 trillion euros of bank debt that will need to be refinanced in the next two years.
The report was released ahead of this week’s annual gathering of the IMF and the World Bank in Washington.