The International Monetary Fund today raised its estimate of the cost of the global financial crisis, to more than $4 trillion in writedowns on soured credit.
The IMF said the total estimated cost of $4.054 trillion includes $2.712 trillion in losses in US-originated assets. European losses were estimated at $1.193 trillion and Japanese losses at $149 billion.
This cost represents what was needed and would be needed by financial institutions because of the deterioration in credit, in particular in the plunge in the value of equities backing credit, such as mortgage loans.
The estimate, which covers the period from the beginning of the financial crisis in mid-2007 to 2010, was published in the IMF's latest Global Financial Stability Report.
The IMF's previous estimate, in January, had only taken into account US-originated assets and projected a loss of $2.200 trillion. No estimate had been given for European and Japanese assets.
'The global financial system remains under severe stress as the crisis broadens to include households, corporations, and the banking sectors in both advanced and emerging market countries,' the IMF said.
'Shrinking economic activity has put further pressure on banks' balance sheets as asset values continue to degrade, threatening their capital adequacy and further discouraging fresh lending,' the 185-nation institution said.
