The International Monetary Fund (IMF) and European Commission (EC) today urged banks to come clean with prompt and detailed disclosures of sub-prime and credit crunch losses.

Their pleas came as the IMF forecast that the credit crunch could continue to worsen if the economic downturn deepens. But it says while global growth will slow this year, America should avoid a recession.

Presenting the IMF's latest report on Global Financial Stability, Jaime Caruana, a director of the IMF's financial markets committee, said that "clear disclosure" of banks' credit crunch and sub-prime disclosure was "very important."

His comments came just hours after Jose Manuel Barroso, the President of the European Commission, urged European banks to quantify losses from the fallout of the sub-prime crisis promptly and in as much detail as possible.

Last week, the US Federal Reverse cut interest rates by an emergency three-quarters of a percent after a slump in share prices across the world is believed to have been exacerbated by the unwinding of €50 billion of index positions by Société Générale's rogue trader Jérôme Kerviel.

Société Générale losses were only revealed three days after the positions were closed.

The IMF said: "Supervisors and auditors have a key role to play to promote early, consistent and clear disclosure of exposures and values of subprime and related securities both on and off the balance sheet."

It said: "Evidence from lending surveys already shows some tightening of lending standards.

“While other regions’ financial institutions appear to have less exposure (than the US), sub-prime related writedowns are still possible,” the report said.

Slower US growth and credit market turmoil stemming from US housing market woes also will hinder the global economy.

Simon Johnson, director of the research department at the IMF said: "The five-year long global expansion has begun to moderate in response to the spreading effects of financial disruptions."

The IMF said US economic growth will slow to 1.5 per cent in 2008, from an estimated growth rate of 2.2 per cent in 2007 and lower than the 1.9 per cent estimate made three months ago.

The IMF now sees world economic growth slowing to 4.1 percent this year, down from 4.9 percent in 2007.

A further cut in interest rates of half a percentage point is expected to be announced by the Fed tomorrow. Such a move is already priced in by the Treasury bond markets.

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