Europe Faces Bank, Sovereign Funding ‘Challenge,’ IMF Says

The funding of banks and governments, especially in some vulnerable euro-area countries, poses a “pressing challenge” to the global financial system even as stability improves elsewhere, the International Monetary Fund said.

European banks need to increase the quality and quantity of their capital to regain access to funding markets and will probably need help from governments, the IMF said today. At the same time, financing conditions are still “tense” for some European countries, which run the risk of having to rely increasingly on their domestic investors to sell debt, it said.