More European banks could fail

The International Monetary Fund said more European banks may fail as they struggle to raise fresh capital from investors.

In its annual review of the European economy published yesterday, the Washington-based lender said financial markets are now "paying increasing attention" to pure leverage rather than accounting for how risky it is. By that measure, Europe's banks score less favorably than those in the US, it said.

As sovereign wealth funds and investors show diminished appetite for putting money into banks and volatile markets make it hard to raise capital, Europe's financial institutions will find their ability to raise funds falling and the need for government support growing, the IMF said.