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IMF sees 200 billion euro capital gap at European banks

September 1, 2011

financialpost

BRUSSELS — The International Monetary Fund has estimated European banks could face a capital shortfall of 200 billion euros (US$287 billion), a European source said on Wednesday.

The figure has prompted a fierce response from European officials who said the analysis was misleading, according to the Financial Times.

The newspaper, citing two officials, said the 200 billion euro figure was one estimate of the impact of marking sovereign bonds to market.

The IMF will publish the analysis in its regular Global Financial Stability Report ahead of the IMF and World Bank fall meetings of global finance leaders in late September. The FT cautioned that the figure was in a draft that could change.

“The IMF vision is biased,” Elena Salgado, Spain’s finance minister, told the FT, adding that the fund had been mistaken in looking only at potential losses without taking account of holdings of German Bunds, which have risen in price.

IMF Managing Director Christine Lagarde drew criticism from European policymakers this week after she called for a mandatory recapitalization of European banks.

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