Banks should rebuild capital, says IMF

Washington: A top International Monetary Fund official said commercial banks should be encouraged to rebuild their capital after the losses sustained in the subprime mortgage crisis.

Murilo Portugal, deputy managing director of the Washington-based IMF, told the annual conference of the Institute of International Finance in Rio de Janeiro that some banks must take steps to strengthen their position in the global economy.

"Especially the systemically important institutions should be strongly encouraged to rebuild capital cushions - preferably by inviting new equity investment and by cutting dividends - in order to bolster confidence and their capacity to support the role as financial intermediaries," he said.

Portugal also told the group that banks should work harder to increase the transparency of financial assets.

Transparency

"Promoting greater transparency of exposures to a variety of complex assets, both direct exposures and indirect exposures through off-balance sheet entities, and improving the valuations of these exposures are critical to reducing the level of uncertainty about potential losses across financial institutions and for restoring investor confidence," he said.