European banks should be required to disclose their exposure to the US sub-prime market, the International Monetary Fund yesterday said. Financial Times

However, it cautioned that regulators should not overlook the benefits of financial market innovation that have been “a powerful source of growth” for the continent.

Launching its inaugural Regional Economic Outlook in London, the IMF said that the European economy was resilient enough to withstand the turbulence in financial markets but it also warned regulators not to “throw the baby out with the bath water” as they moved to learn from the credit squeeze by improving risk assessment.

Michael Deppler, director of the European department, expected 'a moderate slowing with risks ahead'. These included a prolonged downturn in the US housing market and rising oil and commodity prices.