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Global banks have so far only revealed half their losses from the financial crisis, Dominique Strauss-Kahn, head of the International Monetary Fund, told today's annual CBI conference in London.
"It is our view we are still in the situation where a lot of losses haven't been disclosed, Strauss-Kahn said. "How much is a difficult assessment, but let's say something which is close to half of it."
The IMF said in September that banks have some $1.5 trillion (£902 billion) of further losses to unveil.
Strauss-Kahn said: "Probably a little more has been disclosed in the US and a little less in Europe, but it's almost half and half. So we still have a long way to go."
He told the CBI conference in London that the world's banking systems "remain undercapitalised" and that many advanced economies were suffering "far from normal" financial conditions.
It is also too early for governments to start winding down their fiscal stimulus packages, he went on.
"I think it is still too early for a general exit. Exit should instead await a sustained recovery in private demand, as well as entrenched financial stability - a key litmus test.
"We recommend erring on the side of caution, as exiting too early is costlier than exiting too late."
Strauss-Kahn said the overall outlook for the UK had improved and there were signs that increases in unemployment levels were nearing an end, but that recovery would be held back by bank and household balance sheet adjustment.
As such, "the recovery may be somewhat subdued", he said.
The IMF chief also warned banks against taking a "party now" attitude to risk taking before changes to regulatory regimes on bonuses and capital needs had been sorted out.
"It might be encouraging a risk-taking culture - a Mardi Gras effect whereby financial institutions party now in expectation of lean times to come," Strauss-Kahn said.
"Clearly, this is dangerous... and we may run out of time - if we wait too long to implement these reforms, it might be too late."
Reader views (3)
Actually when you consider each of the major banks is holding derivatives positions that has each company having a 50 trillion dollar liability, you could say, on top of the 80 percent of normal losses they are hiding, like through mark to fantasy.....and given CRE value is going to tank......they haven't shown even 1/10th of 1 percent of their losses.
50 trillion in derivatives goes bad, it makes subprime, option arm, cre things look like a cake walk.
Problem is, once one can't pay, they bring the rest down. (which is why BofA, Goldman, and Morgan Stanley were almost wiped out. Had AIG gone, those three would have been gone within days....because of the derivatives blow up)
What was the bailout REALLY for? To keep the derivatives shell game going and keep it from crashing.
That is the cause and crux of the ENTIRE economic problem. Everything else is a result of the derivatives game. The extra inflows for 20 years led to a huge bull market.
Now that it crashed, and is starting to SUCK money, instead of ADD money, everything goes down.
- J, Scottsdale, AZ, USA, 24/11/2009 17:59
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Right now the big three US banks, Citi, JPMorganChase and BOA are holding $1.4 Trillion in cash ... tthe Fed is so worried about a run on the banks! Lending is shrinking not expanding.. go figure!
- James Macleod Ritchie, Oyster Bay Cove, 23/11/2009 16:58
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Only revealed half their losses? Bit like the Labour government then. Wait till after election when the full scale of debt and PFI spending is revealed.
- C Chapman, corridonia italy, 23/11/2009 15:47
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