The International Monetary Fund warned Tuesday that losses from banks during the current global recession could reach $4.1 trillion. That staggering number was the highlight of the IMF's global financial stability report, which added a half a trillion dollars to its previous estimate for the amount financial institutions would have to write down.
The IMF now predicts that financial institutions will have to write down an estimated $2.7 trillion in loans and securities originating in the United States from 2007 to 2010, up from the $2.2 trillion estimate in January and the $1.4 trillion expected in October 2008.
The report added that the financial crisis is not likely near over, stating that it is likely to be deep and long lasting. Conditions have worsened since the IMF's report in October of last year, particularly in European emerging markets.
While regulatory authorities have been proactive in responding to the crisis, the IMF noted, their efforts might not be enough, because policies are being challenged by the scale of resources required.
The fund also cast doubt on recent market optimism, noting that in spite of some improvements in short-term liquidity conditions and the opening of some term funding markets, other measures of instability have deteriorated to record or near-record levels.
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