The world's banks face a $3.6 trillion "wall of maturing debt" in the next two years and must compete with debt-laden governments to secure financing, the IMF warned on Wednesday... "Overall, a comprehensive set of policies -- including capital-raising, restructuring and where necessary resolution of weak banks, and increased transparency about banking risks -- is needed to solve banking system vulnerabilities," it said. "Without these reforms, downside risks will re-emerge."

Basically reality is laying down the gauntlet here (and the IMF is correctly relating this). If banks and governments do not start aggressively raising capital at market (read: much higher) interest rates, they will be exchanging stability for capital paucity. Unfortunately, Western governments have been sending all the wrong signals by allowing banks (and themselves) to largely get away without raising capital at normal rates, through a combination of accounting fraud, procrastination, and money-printing.

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