IMF Panics About EU Banks

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The IMF reports that EU banks may have to sell $3.8 trillion in assets by the end of next year, if the sovereign debt crisis spreads. Many of these banks hold significant amount of debt in the nations where they are based. The agency’s comments in its Global Financial Stability Report included that

“So far, deleveraging has occurred predominantly through buttressing capital positions and reducing non-core activities, leaving the impact on the rest of the world manageable. It is essential to continue to avoid a synchronized, large-scale, and aggressive trimming of balance sheets that could do serious damage to asset prices, credit supply, and economic activity in Europe and beyond.”