IMF and European Bank regulators disagree on need for bank recapitalization

A Reuter's article reports on the disagreement between the IMF and the European bank regulators over the amount of additional capital European banks need.

The IMF thinks the banks need 200 billion euros.  Based on the most recent stress tests, the European bank regulators think the number is a factor of ten lower.

A disagreement like this highlights the need for disclosure of each financial institution's current asset and liability-level data.  With this data, market participants can determine how much, if any, additional capital the European banks need.

Without this data, a disagreement like this can only increase uncertainty and financial market instability.  After all, if the IMF is right, then the question is which banks need to raise this capital.

The International Monetary Fund has estimated European banks could face a capital shortfall of 200 billion euros (176 billion pound), a European source said on Wednesday. 

The figure has prompted a fierce response from European officials who said the analysis was misleading, according to the Financial Times. 

The newspaper, citing two officials, said the 200 billion euro figure was one estimate of the impact of marking sovereign bonds to market. 

The IMF will publish the analysis in its regular Global Financial Stability Report ahead of the IMF and World Bank fall meetings of global finance leaders in late September. The FT cautioned that the figure was in a draft that could change. 

"The IMF vision is biased," Elena Salgado, Spain's finance minister, told the FT, adding that the fund had been mistaken in looking only at potential losses without taking account of holdings of German Bunds, which have risen in price.