THE global financial system remains as risky as it was before the credit crisis, with the necessary “reboot” of the banking sector delayed by the emergency measures taken to prop up economic growth, the International Monetary Fund has warned.

In its twice-yearly Global Financial Stability Report, published on Tuesday, the IMF argued that despite a blizzard of new regulations, the banking system remains vulnerable.

“Although the intentions of policymakers are clear and positive, the reforms have yet to effect a safer set of financial structures, in part because, in some economies and regions, the intervention measures needed to deal with the prolonged crisis are delaying a ‘reboot’ of the system onto a safer path,” it said.

The IMF was one of the global institutions blamed in the wake of the Great Crash of 2008-09 for exaggerating the benefits of financial globalisation, and failing to issue strong enough warnings about its risks.

In its latest analysis, it found that the world’s banks are just as big and intertwined, and just as reliant on short-term wholesale funding — rather than more solid savers’ deposits as before the crash.

“Although some countries, notably the United States, have reduced their dependence on short-term funding, the bulk of the evidence suggests that the structure of the system has not changed in healthier directions,” it said.

The IMF pointed out that in many countries, including the UK, troubled banks were swallowed up by their stronger rivals at the height of the crisis, leaving the financial sector even more concentrated than before 2008.

“Overall, risks in the financial system remain. Of particular concern are the larger size of financial institutions, the greater concentration and domestic interconnectedness of financial systems, and the continued importance of non-banks in overall intermediation.”

The IMF is also concerned about the potential side effects of the ultra-low interest rates and other radical monetary policies central banks on both sides of the Atlantic are using to stave off a deeper downturn.

“If the central bank initiatives are not accompanied by resolute actions to thoroughly restructure the impaired segments of the financial system and solve deep-seated remaining problems in financial institutions, they may inhibit adjustments in the structure of banking systems,” the IMF said.

The IMF urged global regulators to take a series of further measures, including monitoring “non-banks” such as hedge funds, and encouraging banks to offer simpler financial products.

It would also like to see regulators consider banning banks outright from engaging in certain risky activities — instead of hoping that tougher capital requirements will do the job, by making some areas more expensive, and therefore less profitable.

In the UK, where the government is adopting the Vickers Commission’s proposals for ring-fencing banks’ high street lending arms to protect savers, the IMF suggests that if banks believe as a result that they will no longer be bailed out in a future crisis, it could rein in their activities. — The Guardian, London