In its Washington Spring summit, the organisation said it expects the world’s biggest banks to slash their size by $2.6trn (£1.6trn) by the end of next year – representing a 7% squeeze on the size of their combined balance sheets, reported Sky News.
If such a scenario plays out, businesses throughout Britain and Europe are likely to face further difficulty borrowing from banks.
The IMF said it expects a quarter of this balance-sheet crunch to come in the form of lower bank lending, with the rest involving selling off assets and securities.
It added the squeeze was already well underway, with banks having reduced their balance sheets by $580bn in the final quarter of last year.
“There is a risk that a large-scale reduction in assets by European banks could lead to a credit crunch” of the kind seen in the early stages of the credit crisis in 2008/09,” the IMF said.
The organisation, headed up by Christine Lagarde, said embattled euro nations such as Spain and Italy would be most affected by the squeeze. But it also said Britain would suffer a near 1% fall in bank credit even on the basis of its conservative forecast.
IMF financial stability chief Jose Vinals said although the European Central Bank’s Long Term Refinancing Operation had helped ease markets, it was too early to call an end to the crisis engulfing the eurozone.
