PARIS (AFP) — Losses because of the financial crisis sparked by the US subprime mortgage crisis could rise as high as 422 billion dollars (267 billion euros), an OECD report said Tuesday.
That figure was far lower than the 945 billion dollars estimated last week by the International Monetary Fund.
The OECD also said Tuesday that the crisis had revealed a need for a fundamental overhaul of the financial system, including better regulation, said the Paris-based Organisation for Economic Cooperation and Development.
The 422-billion-dollar figure included losses of 90 billion dollars in the United States alone, said the OECD's committee on financial markets.
"Central banks have taken various steps to calm the markets, but concerns remain and the situation is not fully resolved," said committee chairman Thomas Wieser, who also heads up the Austrian finance ministry.
In 2007, the same committee estimated the losses at around 300 billion dollars, "the highest, but correct, official estimate at that time," said Wieser.
Of the OECD's revised estimate, Wieser noted: "If losses reach this level, the recapitalisation of banks would be essential to avoid the harsher economic impacts of deleveraging, including a pronounced drop-off in credit extension.
"It could take six to 12 months for banks to grow themselves out of losses of this size, and longer if capital for actual expansion were required."
In these circumstances, Wiesler added, "the OECD believes that fundamental reform of the financial system and its regulation has to be a key focus of the policy debate going forward."
An OECD statement said that while priority should be given to private sector initiatives to speed the recovery of financial markets, government intervention might also be needed.
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