The IMF says that european banks needs to be strengthened and rescue – Yahoo Finance Spain

By David Lawder

WASHINGTON (Reuters) – european banks need “urgent action and comprehensive” to address the questionable claims that drag and the business models ineffective that threaten to weigh on its profit, said on Wednesday the International Monetary Fund.

In its latest assessment of global financial stability, the IMF said that a weak profitability in an environment of low interest rates and low growth could erode the cushion of the european banks with the time, undermining their ability to support the global recovery and weakening the stability.

deputy director of The IMF money and capital markets the IMF’s Peter Dattels, said that the european banks still account with delinquent loans for an amount of around 900,000 million euros.

The warning comes at a time when markets have been shaken by the crisis of confidence in the biggest German bank, Deutsche Bank, embroiled in a crisis of confidence in the wake of the Justice Department of the united States sue payment of 14,000 millions of dollars for irregularities related to the sale of assets backed by mortgages before the financial crisis, an amount that it believes will make a dent in your capital.

Although the IMF report does not give names of banks, it is expected that the health of Deutsche Bank to be a key issue of debate this week, when they meet in Washington bankers, finance ministers and other senior politicians in the meetings organized by the IMF, the World Bank and the Institute of International Finance. Among the attendees will be the ceo of Deutsche Bank, John Cryan.

“In the euro area, excessive bad debts and the structural burdens in the profitability require an action extensive and urgent,” said the IMF in its report. “To reduce the bad debts and to address the deficiencies of capital in weak banks is a priority,” he added.

The report notes that many european banks are still difficulties with high levels of impaired assets and low profitability, due to problems of lending that has left the last financial crisis. Although a cyclical recovery charge force in the region, the payoff would be too low for many banks to remedy and solve their problems of assets, he said.

The text recommended that the regulators and legislators in europe to strengthen their insolvency regimes to allow entities to annul the questionable claims more quickly, while weaker banks have been consolidated in others stronger, and reduced costs.

“there are Simply too many branches with too few deposits and too many banks with funding costs considerably higher than those of their colleagues,” said the deputy director of monetary and capital markets IMF, Peter Dattels said in a statement. “Addressing these challenges in the business model is vital to ensure sustainable returns,” he added.

The adoption of these measures, together with regulatory changes that will boost confidence without a massive increase in capital requirements could boost the profitability of european banks at 40,000 million dollars a year. Together with a cyclical recovery, may increase the number of european banks considered to be “sanitized” to 72 per cent, from 17 per cent last year.