European banks face as much as $410 billion hit from debt-ravaged countries, according to a report released Wednesday by the International Monetary Fund.
The estimate comes as the IMF said risks to global financial stability have increased for the first time since the collapse of Lehman Brothers in 2008.
The estimate of spillover of credit risk on the banks does not measure the banks' capital needs, which would require a full assessment of bank balance sheets and income positions, the IMF said. Some European banks urgently need to bolster their capital to mitigate the risks posed by this hit. In current market conditions, it may not always be possible for banks to raise capital so public backstops should be used to provide capital to banks as needed, the report said.
Weaker banks need to be restructured, the report said.
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