ECB, France voice reservations on IMF projection of euro bank losses

The European Central Bank and France voiced scepticism over International Monetary Fund estimates showing European banks would need to write down $750 billion (Dh2.75trn) through 2010 in bad loans and securities. "We are looking at it very carefully and we think there are methodological issues we have to clarify with the IMF," ECB President Jean-Claude Trichet told a news conference after a meeting of G20 finance ministers. "With regards to Europe, because of the methodology, in our view we do not have a entirely convincing analysis," he said. In its Global Financial Stability Report, the IMF said US institutions were about halfway through their needed write-downs, while their euro area banks were still lagging. "We were numerous in mentioning our major reservations on the methodology used by the IMF," French Finance Minister Christine Lagarde said after a meeting of finance ministers and central bankers of the Group of Seven industrialised nations. "When we take the figures published by the IMF... by extrapolation of US accounting methods to banks the world over and we compare that with the figures we have... we don't get the same figures," she said. The G7 meeting was followed by a meeting of the wider G20 group which also includes large developing countries like China. The IMF also estimated banks could need additional capital of between $275bn and $500bn in the United States, about $125bn to $250bn in Britain, and about $375bn to $725bn in the euro area. Trichet would not go into a more detailed discussion of the IMF estimates. "The leverage ratio computation seems to be based on US concepts, accounting rules are not the same on both sides of the Atlantic, we may have a methodological bias," he said. Lagarde met IMF head Dominique Straus Kahn last week and said he agreed with her view that the estimates may be methodologically biased. "We discussed the methodology used by the Fund for valuing the toxic assets, which are on the banks balance sheets." Keep up with the latest business news from the region with the Emirates Business 24|7 daily newsletter. To subscribe to the newsletter, please click here .