Washington, 30 Sept. (AKI) - The International Monetary Fund has lowered its estimate for global writedowns for banks and other financial institutions to roughly 3.4 thousand billion dollars but it warned that loan losses may rise with growing job cuts.

In April the IMF estimated in its Global Financial Stability Report that global bank losses could reach 4,000 billion dollars but said it cut the figure by 600 billion dollars to reflect rising securities values and new ways of calculating writedowns.

"This improvement is welcome but there are still significant challenges ahead, particular for banks," said Jose Vinals, director of the IMF's monetary and capital markets division.

The report said that while banks had enough capital to survive, their earnings were not expected to fully offset writedowns expected over the next 18 months.

Vinals said banks were starting to make money again after severe losses in the face of the global financial turmoil but urged them to conserve their profits and not to pay dividends.

"There is a temptation when you go back into profits to have the equity buybacks and the dividend payouts," he told a news conference in Istanbul before the start of the semi-annual World Bank and IMF meetings.

For the period from 2007 through 2010, banks’ writedowns on nonperforming assets are expected to be 2,800 billion dollars worldwide.

The IMF said US banks have recognised about 60 percent of their expected losses, compared with 40 percent in both the euro area and in the UK.

Turning to European countries including Denmark, Iceland, Norway, Sweden and Switzerland, bank writedowns may increase by 120 billion dollars by the end of 2010, the report said.