The International Monetary Fund has put a new price tag on losses stemming from the global economic crisis -- $3.4 trillion.
The figure is an improvement on the fund's last estimate in April, when it expected financial institutions would face some $4 trillion in losses on loans and other assets.
The new price tag is the latest in a series of cautiously upbeat assessments of the global economy, one year on from the meltdown of financial markets triggered by the collapse of Lehman Brothers investment bank.
It comes in the fund's latest "Global Financial Stability Report (GFSR)," a snapshot of global financial markets taken twice a year.
It says financial stability has improved following unprecedented amounts of financial support by governments around the world.
Some of the extreme risks have abated since the last report: markets are on the rebound; banks have raised capital, and emerging market risks have eased.
"With this return of stability our broad estimate of global write-downs for banks and nonbanks -- financial institutions -- arising from the crisis now stands at roughly $3.4 trillion," says Jose Vinals, director for the IMF's monetary and capital markets division.
"This is around $600 billion lower that the last GFSR, largely as a result of rising security values. This improvement is welcome, but we still have significant challenges ahead, particularly for banks," he adds.
The report says there's no cause for complacency. Banks still have to recognize more than half ($1.5 trillion) of their write-downs.
Banks will continue to face higher loan losses, the report says, with delinquencies and defaults to increase amid rising unemployment.
It says deterioration in the commercial real estate market is now "in full swing" in the United States.
And while the outlook for banks is improving, it says earnings will not be enough to offset the coming write-downs.
'Strong Policy Measures'
In Eastern Europe and other emerging markets, the IMF says risks have eased thanks in part to what it called "strong policy measures," including IMF help. But it warns that corporate bond defaults will likely rise further.
In the Commonwealth of Independent States, it says that default rate could double over the next year. In Kazakhstan, it is already over 30 percent.
And emerging Europe is likely to see a rise in the number of bad loans as the downturn continues to bite.
"Emerging-market corporates face sizeable foreign currency debt refinancing over the next two years, while access for subinvestment grade borrowers remains restricted," Vinals says. "Countries facing external and domestic imbalances and with heavy reliance on crossborder banking flows will continue to remain vulnerable."
The report also warns of the potential downside of all that extra public spending to tackle the crisis.
It says that through financial sector bailouts and massive stimulus spending, risk has been shifted from the private sector to the public sector.
And the danger is that all that financial support -- and the resulting swollen budget deficits -- will push up long-term interest rates and choke any economic recovery.
Among its recommendations, the IMF calls for "renewed efforts" to cleanse banks of troubled assets.