IMF analysts see lingering risk of financial crises

IMF analysts see lingering risk of financial crises

Washington:Economists from the International Monetary Fund (IMF) fear that many of the structural causes of the 2007-2009 financial crisis still exist, including banks too big to fail.

The seven economists expressed their concerns in a paper published Wednesday that does not represent the official view of the organization but is intended to stimulate debate among its members.

“Many of the structural characteristics that contributed to the buildup of systemic risks in financial sectors are still in place today, and moral hazard has increased," they wrote.

“In most countries, the structure of the financial system has changed little. In fact, as large banks acquired failing institutions, concentration has increased on average."

It said that in 12 countries that had suffered recent crises the assets of the five largest banks have risen from 307% of GDP before the crisis to 335% in 2009, complicating recovery efforts.

Governments need to rethink how to reduce the threat posed by large financial institutions, “including through reduced complexity, better capital structures, and possibly restrictions on their scope and activities," it said.

The study compares the political and monetary response to the 2007-2009 financial crisis in 11 European countries and the US with the response to crises from 1991 to 2002, which affected 17 countries.