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IMF urges European Union to swiftly introduce full banking union to stabilize financial system

The International Monetary Fund is urging the European Union to move swiftly toward a fully integrated banking sector to stabilize the bloc's financial system.

The IMF said Thursday the 27-member group still faces great challenges "with continuing banking and sovereign debt crises" which require a region-wide solution because of its heavily interconnected banks.

In its first financial stability assessment for the 27-nation bloc, the IMF welcomed this month's EU decision to create a single banking supervisor as "an initial step" but stresses further measures such as a joint deposit guarantee and a joint bank bailout fund are needed.

European policymakers are reluctant to create a full banking union because joint liability implies one country's taxpayers would someday have to bail out struggling banks of another EU country.