Christine Lagarde, Managing Director of the International Monetary Fund (Photo credit: European Council)European banks look set to shrink their balance sheets by $2.6tn (€2tn) over the next 18 months, with a quarter of the deleveraging likely to come from cuts in lending, according to the International Monetary Fund.
In its Global Financial Stability Report, published on Wednesday, the fund warned that, unless officials stepped up their policy response, European banks would dump almost 7 per cent of their assets by the end of next year. It expects most of the deleveraging to come from sales of securities and non-core assets.
However, the fund also sees credit supply shrinking by 1.7 per cent as banks rein in lending to businesses and households.
The fund’s forecasts are the most comprehensive assessment to date of the likely impact of the struggling European banking sector’s efforts to right itself, and they predict a larger scale of deleveraging than previously anticipated...Continue to read.
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