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Emerging Markets Weekly

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The impact of the global financial crisis on the Hungarian financial sector has been limited

Mon, Sep 22 2008, 11:00 GMT
by Erste Bank Bond Research Team

Erste Bank der oesterreichischen Sparkassen AG

FINANCIAL CRISIS

Last Monday, in one of the most dramatic days in Wall Street’s history, Merrill Lynch agreed to sell itself to Bank of America for roughly $50 billion to avert a deepening financial crisis, while another prominent securities firm, Lehman Brothers, filed for bankruptcy protection and hurtled toward liquidation after it failed to find a buyer. The Dow and 2-year U.S. Treasury hit with their biggest 1-day tumble since Sept 2001. On the same day, U.S. insurance giant A.I.G. sought a $40 billion lifeline from the Federal Reserve, without which the company might have survived only few days. The company lost $13.2 billion in the first six months of 2008, largely owing to declining values in mortgage-related securities. Shares in A.I.G. tumbled more than 60 percent on Monday morning as investors grew concerned that the firm lacked capital to withstand cuts to its debt rating. Trading volumes on the NYSE reached the highest on record. Russia’s stock market tumbled 17% and remained closed for the next two following days.

On Tuesday, the Federal Reserve agreed to give AIG a $85bn bridge loan over 24 months, at a cost of 850bp over three month Libor. In return, the government will receive warrants that can be converted into common stock giving the government nearly 80 percent ownership of the insurer. The cost to hedge against losses on U.S. government debt climbed to a record level. Libor overnight climbed to 6,47%. Morgan Stanley and Goldman Sachs came under pressure with stocks losing more than 40% in value.

On Wednesday, the Federal Reserve almost quadrupled the amount of dollars central banks can auction around the world to $247 billion in a coordinated bid to ease the worst crisis facing financial markets since the 1920s. Under the new arrangements, the ECB doubled its limit of dollars it can get from the Fed to $110 billion and Switzerland's central bank can get $27 billion, an extra $15 billion. New swap facilities with the Bank of Japan, the Bank of England and the Bank of Canada amount to $60 billion, $40 billion and $10 billion, respectively. Financial markets welcomed the announcement by lowering the cost of borrowing in dollars overnight to 3.84 percent from 5.03 percent yesterday.

On Thursday, Lloyds TSB Group Plc agreed to buy HBOS Plc for $18.9 billion as the government tried to keep Britain's largest mortgage lender from succumbing to the worsening global credit crisis.

At the end of the week UK, U.S. and German regulators banned short selling of financial companies' shares. In addition U.S. government announced that it is working on a plan to bail out financial institutions in the United States by granting unfettered authority for the Treasury Department to spend as much as $700 billion to buy up distressed mortgage-related assets. Short sale ban and US Treasury money fund plan led to a stock rally around the world on Friday. The financial sector added 5.7%, the Micex index leaped 29% and the RTS index rallied 22%.

LATIN AMERICA

Argentina

Argentina's 2009 budget assumes economic growth of 4 percent, a fiscal surplus of 3.02 percent of gross domestic product and slowing inflation, Cabinet Chief Sergio Massa said. Argentina's peso will weaken to an average of 3.19 pesos per dollar next year from 3.0869 pesos per dollar, Massa told reporters in Buenos Aires. Inflation next year will be 8 percent and the country will have a trade surplus of $12 billion, Massa said. Massa said Argentine law prevents the country from opening negotiations with holders of defaulted Argentine debt until at least 2010.
Argentina may offer to compensate holders of about $25 billion of bonds who refused to accept the terms of the government's 2005 restructuring of defaulted debt, Clarin newspaper reported. The offer, which may be made during a trip by President Cristina de Fernandez de Kirchner to the U.S. this week, would give the so-called holdout bondholders less than what was offered in 2005, the newspaper said, without specifying where it obtained the information. The offer would be based on a plan presented by Barclays Plc, which represents holders of $4 billion to $5 billion of the defaulted bonds, Clarin said.

Brazil

Brazil's retail sales accelerated in July, buoying expectations that sustained domestic demand will allow Latin America's largest economy to weather slower global growth. Retail sales rose 11 percent in July, up from a 8.2 percent gain in June, the slowest pace in 14 months, the national statistics agency said.

Colombia

Colombia's central bank left borrowing costs unchanged as concerns about the fastest inflation since 2001 are offset by slowing economic growth. Policy makers held the interbank rate at a seven-year high of 10 percent for the third consecutive month, meeting expectations of all 29 economists surveyed by Bloomberg. Bank chief Jose Dario Uribe's 16 interest rate increases in the past 2 1/2 years may have reduced inflationary pressures by curbing demand for goods such as cars and real estate. Further increasing rates would exacerbate the economic slowdown, said Liliana Rojas, an economist at Bogota-based Vision de Valores SA.

Ecuador

Ecuador may challenge the legitimacy of its international debt in court based on evidence some of it was fraudulently contracted, President Rafael Correa said. A government audit of the South American country's foreign debt is almost ready, Correa said in a television interview broadcast on the Canal Uno network. ``The findings are harrowing,'' Correa said. ``If we find we can win international lawsuits, that's what we'll do.'' Correa has roiled debt markets with threats to default since he took office last year. With revenue increased by record oil prices earlier this year, Ecuador has met its repayment schedule on its $3.9 billion in foreign debt during Correa's term.
Ecuadorean President Rafael Correa said he would resign if voters turn down a new constitution in a Sept. 28 referendum. Should the constitution fail to win approval from more than half the voters, former officials and governing bodies --including a suspended congress -- would be reinstated, he said in his weekly radio and television broadcast.

El Salvador

Standard & Poor's revised the sovereign credit outlook for El Salvador to negative from stable but affirmed the "BB+" rating on Wednesday, citing structural weaknesses despite progress on economic management. "Poor social indicators; education, technology, and training gaps; and high crime rates constrain economic prospects," S&P said in a statement. S&P did say the rating, one notch below investment-grade, was supported by a stable monetary environment which benefited from dollarization in 2001. It also benefited from a track record of predictable, market-oriented policies that has created a favorable investment environment, sustained economic growth, and led to gradual debt reduction. But the rating agency added that inefficient gains in productivity and rising inflation, peaking at 9.5 percent in 2008, undermine the country's competitiveness.

Mexico

Mexico's central bank left its benchmark interest rate unchanged, breaking a streak of three consecutive increases, as policy makers said economic growth may slow and inflation will probably remain within forecasts. The bank's five-member board, led by Governor Guillermo Ortiz, left the key lending rate at 8.25 percent. While inflation may continue to accelerate, the bank's statement that price increases will probably remain within its forecasts signal policy makers will leave rates unchanged for the rest of the year, said Gabriel Casillas, an economist at Banco UBS Pactual.

Peru

Peru's inflation will slow next month on declining prices of imported commodities, central bank President Julio Velarde said. The country's fastest inflation in a decade will slow as prices of crude oil, wheat, corn and soybeans fall, Velarde told a congressional panel. Prices will rise less than 3 percent in 2009 as six increases in the bank's lending rate this year help slow consumer spending, he said.

Venezuela

Venezuela expelled a director of Human Rights Watch after the group issued a report charging President Hugo Chavez's government is restricting its opponents political freedoms to help consolidate power. Jose Miguel Vivanco, Americas director at Human Rights Watch, violated the Venezuelan constitution by ``attacking Venezuela's democratic institutions,'' according to an e-mailed statement from the Foreign Ministry. ``That's enough,'' Foreign Minister Nicolas Maduro said, according to a statement from the Information Ministry. ``Anyone who wants to interfere in our system and undermine our institutions from within will get the same response.''
Moody's Investors Service put Venezuela's "B2" foreign currency sovereign credit rating on review for a possible upgrade, citing an improved debt position and a good payment track record. "Venezuela's debt indicators have reported clear and sustained reductions in recent years," Moody's sovereign credit analyst Gabriel Torres said in a written statement. "But because political concerns have constrained the rating in the past, our review will consider whether the internal political volatility is less likely to impact debt payments than suggested by the current ratings structure," he added. Venezuela's economy remains too dominated by oil production while political concerns in the past have constrained the rating. However the debt indicators have showed clear and sustained reductions in recent years. "... our review will consider whether the internal political volatility is less likely to impact debt payments than suggested by the current ratings structure," he said. Moody's will keep a close watch on how the government handles the drop in oil prices from record highs. It is high oil prices that have counteracted Venezuela's weak institutions and macro-economic imbalances. "Given Venezuela's relative lack of economic diversification and its noisy political environment, its susceptibility to event risk is assessed as "high" in Moody's sovereign bond methodology," the statement said.

AFRICA & MIDDLE EAST

Egypt

Egypt's unemployment rate fell to 8.4 percent in the second quarter from 8.9 percent in the previous three months, Al-Masry al-Yom reported, citing the Central Census Authority. More than 30 percent of Egypt's university graduates were unemployed in the three months through June, even as the jobless rate fell, the Cairobased independent newspaper said. Two million people were unemployed in the second quarter, the newspaper said.

Nigeria

Nigeria's economic growth accelerated to 6.7 percent in the second quarter, driven by production in non- oil industries. Growth accelerated from 5.5 percent in the previous three months, the Abuja-based Central Bank of Nigeria said in a statement on its Web site.
Nigeria's main militant group announced a cease-fire ``until further notice'' in the oil-rich Niger River delta region. The Movement for the Emancipation of the Niger Delta said it decided to halt a week of attacks on Africa's biggest oil industry because of pleas from prominent people from the region. ``We hope that the military has learnt a bitter lesson,'' MEND spokesman Jomo Gbomo said in an e-mailed statement. `The next unprovoked attack will start another oil war that will be so ferocious that it will dim the pleas of the elders.'' The Nigerian military welcomed the cease-fire, saying it will remain on guard in case the announcement was meant to deceive it.

South Africa

The ouster of South African President Thabo Mbeki may further rattle investors contending with the global financial crisis, a growth slowdown in the continent's largest economy and a near record trade deficit. ``International investors are already nervous, and this just adds to it,'' said Patrick Mathidi, a fund manager at Johannesburg-based RMB Asset Managers, which oversees about $24 billion. The departure of Mbeki clears the way for African National Congress leader Jacob Zuma, 66, to strengthen his influence under a caretaker leader whom the ANC may name today. Mbeki bowed to the ANC's demand two days ago to quit after a High Court judge suggested he pressured prosecutors to pursue corruption charges against Zuma, who will likely win 2009 elections.

ASIA

China

China cut interest rates for the first time in six years and allowed most banks to set aside smaller reserves as worsening credit-market turmoil and weakening export demand dimmed the outlook for economic growth. The People's Bank of China reduced the one-year lending rate to 7.20 percent from 7.47 percent, effective Wednesday, and lowered the reserve ratio at the nation's smaller banks by 1 percentage point.

Pakistan

The terrorists who carried out the truck bombing of the Marriott Hotel in Islamabad that killed 53 people two days ago were aiming to strike at Pakistani leaders meeting nearby, Prime Minister Yousuf Raza Gilani said. Security around the prime minister's house, where leaders were attending a dinner, prevented the attack, the official Associated Press of Pakistan cited Gilani as saying in Lahore. The Czech ambassador, two U.S. citizens and a Vietnamese woman were among those killed at the hotel, the government said. ``It is a cowardly act of terrorism against innocent people,'' Gilani said, according to APP. ``We need cooperation from all to cut the roots of terrorism, which is defaming the country in the world.''

South Korea

South Korea won ``developed'' status from FTSE Group, enabling its stock market to attract more of the estimated $3 trillion in funds that track the index provider's global benchmark indexes. The upgrade from the country's ``advanced emerging'' rating takes effect in September 2009, Mark Makepeace, chief executive of London-based FTSE, told reporters in Seoul. Investors who benchmark against FTSE's South Korea indexes may buy shares including Samsung Electronics Co., the world's biggest computer-memory maker, and Posco, Asia's third-largest steelmaker, to reflect the upgrade. Becoming a developed market may lead to as much as $16 billion flowing into South Korean stocks, bourse operator Korea Exchange Inc. said in a statement.

Thailand

Thailand's ruling party unified around Somchai Wongsawat, putting the relative of deposed Prime Minister Thaksin Shinawatra in position to become the country's 26th prime minister when lawmakers vote tomorrow. Somchai, 61, faced opposition from some in his People Power Party who backed the re-election of Samak Sundaravej, who was forced to step down last week after a court said he violated the constitution by hosting a cooking show. Somchai has the backing of the PPP-led six-party coalition, which controls 315 of 480 seats in the House of Representatives.

EMERGING EUROPE & CIS

Hungary

The impact of the global financial crisis on the Hungarian financial sector has been limited, Hungary's financial market watchdog PSZAF said in a statement on Friday. PSZAF said it had surveyed all segments of the financial sector asking institutions to report on their existing or potential business links or any potential losses related to battered foreign institutions. "Based on the data in the survey, banks' risk exposure to the international players affected by the crisis amounts to about 1.3 percent of the Hungarian banking sectors' 2007 equity, and within this the really risky portfolio is only 0.15 percent," PSZAF said. "Based on the survey, the U.S. subprime crisis has had a minor effect on Hungarian financial service providers, they operate in a stable and predictable manner," it said, adding that PSZAF continued to closely monitor the impact of market turmoil. Earlier on Friday, central bank Governor Andras Simor said the financial crisis, which this week saw Lehman Brothers filing for bankruptcy protection, Merrill Lynch losing its independence and the U.S. government bailing out insurer AIG, would not have a significant direct impact on Hungary. "I said and I am still saying that this financial crisis will have no direct significant impact on Hungary," Simor said.

Kazakhstan

Banks in Kazakhstan, holder of about 3 percent of the world's oil, aren't doing enough to guard against bad debts, the country's financial regulator said. ``The amount of money Kazakhstan's banks put aside to cover bad loans is at a minimum level'' compared with loan quality, Financial Supervision Agency chief Yelena Bakhmutova told reporters in the commercial capital Almaty today. Net income at Kazakhstan's 36 banks has fallen 47 percent this year as lenders put aside more money to cover bad loans, the agency said in a statement. Provisions rose 42 percent in the first eight months to 743 billion tenge ($6.2 billion), a reserve ratio of 8.2 percent, the watchdog said, without giving figures for individual banks. Kazakh economic growth halved in the first half to 5.4 percent as banks curtailed lending amid a global tightening of credit. The government said Sept.12 it plans to invest about $1 billion in distressed assets fund to help compensate banks for the depreciation of assets provided as collateral for loans. About 36 percent of all Kazakh loans are secured by property, Bakhmutova said. The quality of credits is ``under pressure'' because of a slowdown in construction and a decline in apartment prices, she said.
The global credit crisis may have shaken Kazakhstan's banks this year but the world's biggest bank HSBC sees a chance to crack a lucrative distant market long dominated by domestic players. Until a year ago, Kazakh banks tapped global debt markets aggressively to fund growth, making it too hard for Western banks to gain more footing. But the credit crisis has changed the landscape, leaving local banks scrambling for cash. Simen Munter, chief representative in Kazakhstan for HSBC, told Reuters it was an opportunity not to be missed in Central Asia's biggest economy and the region's top oil producer. "In the short term we clearly see that our competitors are struggling quite a lot. That's a very good opportunity for a foreign institution that has capital and appetite," he said. "You need to recognise that HSBC is a very conservative organisation. Clearly we're very selective... We see (Kazakhstan) at a growth story. We have appetite for good risk." He said HSBC, with its focus on emerging markets in Asia, opened its first branch in Kazakhstan in July to break into commercial banking and planned to open another two this year. "I think we'll open 10 branches by the end of next year," he said. "We aim to grow into a mid-size bank in Kazakhstan." Despite liquidity and refinancing concerns, Kazakhstan's banking sector, with most banks' profits still in the black, is an attractive emerging market investment destination.

Moldova

Fitch Ratings downgraded on Monday its credit rating for Moldova from positive to stable reflecting a deterioration in Moldova's external finances and continued inflation pressure, and affirmed Moldova's long-term foreign and local currency ratings at 'B-' and 'B', respectively. "The revision to a Stable Outlook reflects the deterioration in Moldova's external finances and continued inflationary pressures. The country has been hit by significant negative external shocks which have clouded the near-term outlook," Fitch said in a statement. Moldova's main foreign trade partner, Russia, dealt a heavy blow on the country's economy by banning Moldovan wine exports for most of 2006 and 2007 and by doubling the price of gas in 2006, and then further increasing gas prices to $253 for 1,000 cubic metres at present. In 2007 Moldova, one of the poorest countries in Europe, was hit by a drought that reduced sharply the agricultural output. "The impact of these shocks has been widely felt throughout the economy. The current account deficit widened to almost 18% of GDP in 2007 while Fitch estimates economic growth slowed to 3.0% in 2007. Inflationary pressure remains in double-digits," Fitch said. It added that Moldova remains susceptible to negative political and economic shocks in view of its high trade deficit, rising external debt burden, low external liquidity and exposure to trade with Russia with which it remains in dispute over the separatist province of Transdniestria. Fitch said that the Moldovan economy faces many structural weaknesses, including a large government sector and a poor business climate. Moldova's large trade deficit is partly offset by the remittances of the Moldovan migrant workers, which Fitch estimates at around 20% of the GDP last year. Moldova's net external debt burden is higher than the 'B' range median of 6.0%. Among positive factors, which support Moldova's ratings, Fitch cited the decreased government debt and small budget deficit last year. "Fitch believes parliamentary elections in 2009 could lead to fiscal pressures," it concluded.

Romania

The Romanian government on Thursday raised its gross domestic product forecast to 495 billion lei ($193.9 billion) from RON475 billion as part of its third revision of the budget this year, the Mediafax news agency reported. According to the report, the government maintained the budget deficit limit at 2.3% of GDP. Mediafax quoted a note approved by the government and presented by Economy and Finance Minister Varujan Vosganian as saying that the Justice and Public ministries will each receive RON1 billion, while the Agriculture and Interior ministries will receive RON750 million and RON600 million, respectively. The Transportation Ministry will receive EUR100 million, Vosganian said. In mid-July, the government revised this year's budget upward by RON842million due to higher-than-expected GDP at the end of the year, but kept its 2.3% of GDP budget deficit target unchanged. It then raised its GDP forecast to RON475 billion, from RON440 billion. Romania reported an economic growth of 8.8% in the first half of the year, driven by 9.3% growth in the second quarter, following a good agricultural year. The Romanian budget deficit was 0.64% of gross domestic product in the first seven months of 2008, finance ministry data showed, while in the first half of the year, the budget deficit stood at 1.18% of GDP.

Russia

Russia and China led the biggest rally in emerging-market stocks in at least two decades as authorities around the world took steps to shore up banks and prevent a further flight from riskier assets. Russia's ruble-denominated Micex Index jumped 25 percent and government bonds surged after President Dmitry Medvedev pledged $20 billion to end the nation's worst financial crisis since the 1998 default. China's CSI 300 Index jumped by a record 9.3 percent, led by Bank of China Ltd., after Beijing scrapped a stock-trading tax and said it will buy shares in three of the largest banks. The MSCI Emerging Markets Index jumped 6.9 percent to 820.73, the biggest gain since it was set up in 1987. Markets rebounded as the government measures added to $220 billion poured into the world financial system this week to encourage lending, while U.S. and U.K. regulators considered restricting investors from betting on stock declines. U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke proposed moving troubled assets from financial companies into a new institution.
Ratings agency Standard & Poor's (S&P) cut its ratings outlook on Russia to stable from positive on Friday, citing concern about the country's response to the financial market crisis. Russia's long-term foreign currency rating was affirmed at BBB+, the agency added in a statement. "The outlook revision is based on growing uncertainty regarding Russia's economic policy response as the liquidity crisis in its financial markets has deepened," said S&P credit analyst Frank Gill in the statement. "If policy responses to a slowdown in the economy were to become more antagonistic toward foreign creditors, capital outflows would likely accelerate, undermining external liquidity and growth prospects," S&P said, adding that this could lead to downward pressure on the ratings.

Slovenia

Slovenia's opposition centre-left Social Democrats (SD) defeated the centre-right Slovenian Democratic Party of Prime Minister Janez Jansa in Sunday's parliamentary election, according to preliminary official results. Slovenia's parliament has 90 seats, of which two belong to representatives of Italian and Hungarian minorities. Following are key facts on the four parties that are likely to form a new government coalition.
SOCIAL DEMOCRATS (SD) - Likely to get 29 seats, the party has been the main opposition grouping during Jansa's rule and is led by European Parliament member Borut Pahor. Descendant of the former Communist Party, it pledges to liberalise the economy but also increase lowest salaries, provide more support for the elderly, jobless and sick, improve public health and cut defence sending. Has agreed coalition with fellow centre-left LDS and Zares.
ZARES - Nine seats. A centre-left party formed last year by seven parliament deputies who defected from the Liberal Democrats. Headed by Gregor Golobic, a close ally of late centre-left prime minister and former president Janez Drnovsek, it urges more market competition and further cuts in public spending.
LIBERAL DEMOCRATIC PARTY (LDS) - Five seats. Slovenia's strongest party for 12 years until it lost the 2004 election, after which it broke up. A newcomer to politics, lawyer Katarina Kresal, took the reins last year. Pledges to boost competitiveness of local economy by increasing research and technology spending.
DEMOCRATIC PARTY OF SLOVENIAN PENSIONERS (DESUS) - Seven seats. Although left-of-centre, party was a junior partner in Jansa's conservative government but has indicated it would be ready to join the new centre-left coalition. It demands higher pensions and better health care for the elderly. It is headed by Karl Erjavec who was Slovenia's defence minister for the past four years.

Turkey

Turkish stocks rose by as much as 14 percent on Friday to their highest level of the week, as sentiment was buoyed by U.S. authorities' plan for radical action to stem the effects of the global credit crisis. The lira also recouped the week's losses against the dollar on Friday while bonds firmed. The gains are the first since Turkish stocks fell more than 16 percent between Monday and Thursday to a three-year low, led lower on a wave of risk aversion by financial and insurance firms. Banking shares surged 17 percent, while Istanbul's main index closed 12.89 percent higher at 36,370.16 points, after rising as high as 13.75 percent earlier. Turkish stocks outperformed the emerging equities index which was trading 8.96 percent higher at 1405 GMT. The lira closed 1.6 percent stronger at 1.2530 against the dollar on the interbank market from the previous 1.2735. It was trading at 1.2485 in after hours trade. The lira is now back to where it traded before U.S. bank Lehman Brothers filed for bankruptcy protection and sparked panic sales in global markets. Bond prices rose and the yield on Turkey's April 14, 2010 benchmark bond fell to 19.20 percent from the previous day's 19.91 percent. Analysts said the markets' rally could continue in the coming week depending on the developments in the United States.

Ukraine

Ukraine's central bank said it will be able to keep the hryvnia's exchange rate within the planned limits for this year and widen the corridor the currency may trade to 10 percent from next year. The Natsionalnyi Bank Ukrainy will allow the currency to rise or fall 4 percent from a midpoint of 4.85 against the dollar to the end of 2008, Petro Poroshenko, head of the bank's council, said at a press conference in Kiev. The bank, which kept the hryvnia at 5.05 from April 2005 until May this year, will widen the range to five percent on either side of the midpoint from 2009, he added.
Ukrainian soccer officials have assured UEFA that the country's political problems will not affect preparations for co-hosting the 2012 European championships, the country's soccer federation said on Friday. A dispute between President Viktor Yushchenko and Prime Minister Yulia Tymoshenko split the coalition this month. Unless a new one is formed, Ukraine may hold its third parliamentary election in as many years. UEFA, the European governing body, is due to decide next week whether to take the championships away from Ukraine and co-hosts Poland after criticising for months progress on building stadiums and modernising infrastructure.

INDUSTRIAL COUNTRIES

Iceland

Iceland's economy faces a difficult turning point amid foreign financing constraints, and economic activity is set to come to a standstill this year and contract in 2009-2010, the International Monetary Fund said on Friday. The IMF, in its annual assessment of Iceland's economy, urged the authorities to maintain a tight monetary policy stance to contain inflation and bolster confidence in its currency, the crown. "The authorities face the challenge of facilitating an orderly rebalancing process, while mitigating risks," the IMF said. Global market turmoil has taken a toll on Iceland's markets since the end of 2007 and its currency has depreciated by over 40 percent, forcing prices to rise. The IMF said the currency was "somewhat below its equilibrium level" and a further decline in the crown could fuel inflationary pressures, erode households' purchasing power, and squeeze private sector balance sheets and pressure the capital account. IMF "directors therefore saw little or no scope for monetary easing until inflation is placed firmly on a downward path," the fund said, while calling on the authorities to carefully manage domestic liquidity. As the global credit crisis has escalated, Iceland's three largest banks have slowed lending growth, consolidated funding needs, withdrawn from marginal markets, and mobilized retail deposits abroad, although their ability to deleverage has been limited by global risk aversion.
The IMF urged Iceland's authorities to "pursue vigorously policy actions to mitigate banking sector risks". It said measures to enlarge capital cushions and boost liquidity buffers could restrain the growth of banks' balance sheets.

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Published on  Mon, Sep 22 2008, 11:16 GMT