The world’s largest financial institutions are getting healthier, with credit-related losses expected to ease over the next year, the head of an international banking group said.

"I think that by and large the health of the largest 20 to 30 global financial institutions is improving," Charles Dallara, managing director of the Institute of International Finance, told a news conference in Tokyo.

The IIF is an association representing more than 375 of the world’s major banks.

"I think it is reasonable to say that we can expect moderation over the next year or so in certain aspects of the turbulence surrounding the structured products and the valuation losses on those products," the former US assistant Treasury secretary said.

"It is not unrealistic to expect over the next year that we may be moving into a phase of some global stability," he told the Foreign Correspondents’ Club of Japan.

But he warned that the market turbulence would not end unless the US housing market shows clear signs of bottoming out.

Washington last weekend announced it had seized the country’s two largest but ailing mortgage lenders Fannie Mae and Freddie Mac in an attempt to stabilise markets, a move that received a mixed welcome.

The two lenders have been devastated by the "subprime" crisis, in which Americans are struggling to make mortgage payments on loans they received despite their patchy credit histories.

Article by: www.sundaytimes.co.za