Sep 30, 2009, 6:32 GMT
Istanbul - Financial sectors around the world are stabilizing, the International Monetary Fund said Wednesday, as it slashed its forecasts of bank losses for the first time since Wall Street's near collapse just over a year ago.
But the IMF also warned against 'complacency' and urged governments to keep their unprecedented interventions in financial firms in place until a recovery is more assured.
In its semi-annual Global Financial Stability Report, the IMF cut its forecast for global writedowns to 3.4 trillion dollars, down from 4 trillion dollars predicted in April. The revision was mainly due to rising prices for the mortgage-backed securities at the heart of the financial crisis.
US financial firms have taken the most losses over the past year but are also further along in recognizing them than their European counterparts, according to the report, which was released ahead of the IMF and World Bank's annual meetings in Istanbul later this week.
Until Wednesday, the IMF had been steadily raising its forecast for losses since the collapse of US investment bank Lehman Brothers Holdings last September sent shockwaves through the entire financial industry.
The Wall Street crisis prompted banks to freeze lending to consumers and helped plunge the wider world into its worst recession in seven decades. Governments stepped in to prop up lending by plugging trillions of dollars into struggling financial firms.
The IMF said the US housing market downturn - which sparked Wall Street's crash by exposing banks to massive mortgage-related losses - was also on the brink of ending.
US home prices would fall another 4 per cent before bottoming out in 2010, the IMF predicted. Prices have dropped 33 per cent in the US since their peak in mid-2006, prompting a record number of foreclosures by homeowners.
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