IMF vs Treasury and FSA
The International Monetary Fund has published some big and scary forecasts of losses banks and other financial institutions are likely to make in the coming couple of years.
And the emergency service for the global economy has also made some eye-watering estimates of additional capital that banks may need to raise.
Here are the headlines:
1) total losses for banks, insurers and other institutions from loans and investments in the US, Europe and Japan from 2007 to 2010 will be $4.1trillion or £2.8trillion - which is the equivalent of writing off the entire output or GDP of the United Kingdom for two years (a big number);
2) in the UK, the eurozone and what the IMF calls "other mature Europe", banks will need to raise a further $875bn of additional capital by the end of 2010 and perhaps as much as $1700bn - which implies that we'll see a good few more banks taken into public ownership.
Specifically on the UK, the IMF estimates that the costs to taxpayers (or us) of bailing out our big banks will be 13.4 per cent of GDP or around £200bn, rather more than the Treasury has been estimating or will factor in to tomorrow's budget.
On the IMF's figures, only Ireland will suffer greater taxpayer costs as a proportion of GDP. In the US, the so-called stabilisation costs would be 12.1 per cent of GDP.
However, the Treasury says the IMF ignores the fees it has received for some of the financial support to banks that's been provided and it thinks the IMF is being too pessimistic on potential losses.
The Tories of course argue that the IMF's assessment is just another manifestation of the costs to us all of the authorities' failure to rein in the lending bubble before it became almost lethally super-sized.
Meanwhile the Financial Services Authority is not overjoyed that the IMF says British banks will have to raise a minimum of $125bn of additional capital and perhaps as much as $250bn.
The City watchdog would make the following points:
a) it wouldn't disagree with the IMF's estimate that banks will incur further huge losses in the coming year or two;
b) it believes British banks have already raised sufficient capital to absorb those losses safely;
c) in measuring the capital ratios of banks (their capital resources relative to loans and other assets) the FSA is a bit bemused that the IMF doesn't seem to weight assets by their riskiness;
d) the FSA would not disagree that over the long term banks will have to hold more capital relative to assets than recent norms, but the FSA believes it would be bonkers to force banks to raise this additional capital until the recession is over - because to do so now would further deter banks from lending and would deepen and lengthen the recession.
Here's the bottom line.
Many may agree with the IMF's analysis and its desire that banks, including British ones, should raise more capital sooner rather than later.
But the power to force banks to raise additional capital rests with national regulators, such as the FSA, not the IMF.
And if the FSA doesn't believe that banks have an urgent need to raise capital, then banks won't raise massive amounts of additional capital (barring the disclosure of booboos that have somehow remained hidden).
UPDATE 00:05 The Treasury has shouted very loudly at the IMF. And the IMF has tonight withdrawn from the online version of its Global Financial Stability Report the table showing the costs to the British taxpayer of the bank bailout as being 13.4 per cent of GDP. That table is now, according to the IMF, "embargoed" - whatever that means.