IMF Warns of Market Collapse

The global financial system is on the brink of a meltdown and additional steps must be taken immediately by the richest nations to calm jittery bankers and investors, the International Monetary Fund warns. The IMF’s chief Economist has predicted that world stocks could slump another 20% before finally stabilising on if the worlds richest nations did not take even more steps to counteract the flood of selling in the market.

Pressure again mounted on the G7 finance ministers to do more and take all necessary steps to ensure that the banking system remains stabilised and that markets do not collapse around the world. Dominique Strauss-Kahn has suggested that all methods so far implemented by the G7 have “not yet achieved the goal of stabilising world markets and bolstering confidence to the level it needs to be.”

He further stated that:

“Intensifying solvency concerns about a number of the largest US-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown. Countries would need to take further measures, including interest rate cuts and steps to bolster the banks.”

It will be interesting to see what the fall out is going to be. Tomorrow in Britain, the Governments £400 billion rescue plan will be enacted and it will reveal just how much money British Banks need to survive. It could be a real indicator of how badly British Banks have been hit by the crisis.

Royal Bank of Scotland (RBS), which has seen its market value fall to under £12 billion, is to ask the government to underwrite a £15 billion cash call. HBOS (HBOS), Britain’s biggest provider of mortgages is requesting up to £10 billion in emergency funding, while Lloyds TSB (LLOY) and Barclays (BARC) require £7 billion and £3 billion respectively each.