Europe must clean up its banks: IMF

October 3, 2009

, ISTANBUL, Oct 3 – Europe must move to clean up its banks after testing their financial stability, the International Monetary Fund said on Saturday amid the worst global economic crisis since World War II.

"It\’s time to clean the banks," Marek Belka, head of the IMF\’s European department, said in Istanbul as finance chiefs from the G7 richest world economies gathered in Turkey\’s biggest city for talks on the economic crisis.

"We need a more resolute approach to addressing the balance sheet risks faced by banks and to take action for recapitalisation or restructure viable institutions and dissolve others as necessary," he said.

Bank tests were "very helpful" but there should now be action, he added.

The European Union\’s Swedish presidency on Thursday said tests on 22 European banks had shown lenders were "sufficiently capitalised" despite credit losses for 2009 and 2010 estimated at 400 billion euros (583 billion dollars).

The results of the tests, conducted by the Committee of European Banking Supervisors, showed that capital ratios would be well above a minimum requirement of 4.0 percent — hovering at between 6.0 and 9.0 percent.

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