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IMF, ECB at Odds Over Sovereign-Debt Damage to Banks, FT Says

Damage to eurozone banks’ balance sheets from holding Irish, Greek, Portuguese, Italian, Spanish and Belgian sovereign debt may amount to as much as 200 billion euros ($286 billion) according to one estimate by International Monetary Fund staff, the Financial Times reported, citing two unidentified IMF officials.

That would be a drop of 10 percent to 12 percent in the banks’ tangible common equity, the core measure of their capital bases, the newspaper said.

A draft of the IMF’s Global Financial Stability Report, which uses credit default swap prices to estimate the market value of the six countries’ government debt, has put IMF officials and European authorities at loggerheads, with the European Central Bank and eurozone governments dismissing the document as partial and misleading, the FT said.

The analysis, which was due to be discussed yesterday by the IMF’s board, may be revised, the newspaper said.

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