Lagarde says European bailout fund should consider providing direct support to banks

WASHINGTON – The head of the International Monetary Fund says the officials managing Europe’s debt bailout fund should consider providing financial support directly to European banks that need more capital reserves.

IMF Managing Director Christine Lagarde said Thursday that supplying more capital directly to European banks could help ease the debt crisis.

Speaking at a news conference to open three days of meetings on the global economy, Lagarde noted that the banks can now receive bailout money only from European governments. She said that officials should change that so banks could receive money directly from the European bailout fund.

She said this would provide more flexibility in combating the financial crisis and move the European economy “towards stronger and better integration.”

At the same time, Lagarde said she thinks the IMF’s resources to help Europe manage its debt crisis and other financial threats will be “significantly increased” because of pledges that countries have been making.

In a TV interview later, Lagarde said she’d received commitments of $320 billion in additional support so far. She told Bloomberg Television that she expected more commitments before Saturday, when the IMF’s spring meetings will end.

The boost to IMF resources is a major issue for the spring meetings of the 188-nation IMF and its sister lending agency, the World Bank. Before policy committees of both agencies meet Saturday, finance officials and central bank presidents of the Group of 20 major economies will hold two days of talks starting Thursday night.

Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke will represent the United States at the meetings of the G-20. The G-20 includes traditional powers such as the United States, Japan and Germany and fast-growing emerging markets such as China, Brazil and India.

Last week, Lagarde scaled back her IMF fundraising target. She said that a $500 billion goal she had set in January could be reduced because of steps Europe has taken and stronger growth globally. She declined to specify how much less funding the IMF needs.

Japan said this week that it’s prepared to contribute $60 billion. And three European countries — Denmark, Norway and Sweden — promised a combined $26 billion.

Europe had previously set a target of providing $150 billion from the 17 nations that share the euro common currency and $50 billion from non-eurozone nations.

The United States has declined to provide additional loans to the IMF, preferring to keep pressure on Europe to do more to manage the debt crisis.