(Agencies)
Updated: 2008-04-08 23:41

The unusually precise and harsh biannual report, in particular critical of Wall Street, comes ahead of the IMF and the World Bank spring meetings Saturday and Sunday in Washington.

At their last meetings, in October, several developing countries criticized the IMF, which is dominated by the Group of Seven rich countries, for not having foreseen the credit crisis developing in the world's biggest economy, and for being slow in responding.

The IMF, whose core mission is to maintain global financial stability, said there was "a collective failure to appreciate the extent of leverage taken on by a wide range of institutions -- banks, monoline insurers, government-sponsored entities, hedge funds -- and the associated risks of a disorderly unwinding."

"It is now clear that the current turmoil is more than simply a liquidity event, reflecting deep-seated balance sheet fragilities and weak capital bases, which means its effects are likely to be broader, deeper, and more protracted," it said.

The report criticizes the "excessive risk-taking" and "weak underwriting" undertaken by under-capitalized institutions and recommends such measures as reform of ratings systems and a change in compensation structures for managers of financial institutions.

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