Risks of a fresh banking crash have diminished over the past six months but the financial system remains fragile four years after the crisis that took the global economy to the brink of meltdown, the International Monetary Fund (IMF) has said.
In its half-yearly Financial Stability Report, the Washington-based IMF said the sovereign debt problems affecting Europe and the vulnerability of banks posed key downside risks to stability and recovery.
Since the last IMF meeting in October, Ireland and Portugal have joined Greece in requiring bailouts to see them through their financial difficulties.
“Sovereign balance sheets remain under strain in many advanced economies, as illustrated by increased sovereign bond market volatility in some euro area countries over the past six months,” the report said.
It said UK banks were exposed to weakness in residential and commercial property. “Banks face pressure on the asset side of their balance sheets because of concerns about the quality of exposures,” it said.