MercoPress. South Atlantic News Agency

IMF chief predicts end of independent investment banks

IMF Dominique Strauss-Kahn

The global financial crisis is not over and more banks could close, possibly leading to the disappearance of independent investment houses, IMF chief Dominique Strauss-Kahn told reporters in Cairo.

"The fact that a certain number of banks in the United States are restructuring shouldn't lead to panic," he said in the wake of Monday's collapse of major US investment bank Lehman Brothers. "But these events add to the uncertainty, and financial tensions cannot be excluded in the short term," with banks other than Lehman Brothers also in a bad position, he said. Predicting "a narrower global financial sector", IMF managing director said certain "players will disappear", particularly in the United States, with the possible gradual elimination of independent investment banks like Lehman or Merrill Lynch. Lehman Brothers was seen in financial markets as one of the big four United States investment banks, along with Morgan Stanley, Goldman Sachs and Merrill Lynch, which announced on Monday it is to be taken over by Bank of America in a 50 billion US dollar deal. We are facing an unprecedented financial crisis," Strauss-Kahn said, because it stems from "the heart of the system," the United States, and not from its "periphery" and has affected the whole world simultaneously. "Some parts of the world are more or less affected, but the slowdown is general," he said, adding: "The entire global economy will slow down by between a half and two percent," including in China and Europe. "Something new is more dangerous than something that happens repeatedly, but a difference with (the stock market crash of) 1929 is that we have instruments which don't allow us to avoid the crisis but to soften the consequences and correct their effects," in particular the IMF, he said The IMF boss said European banks, which combine several different functions, were less likely to be affected and did not risk "being brought to the ground" like their US counterparts.