IMF chief says fallout from financial crisis not over

By Alaa Shahine and Alastair Sharp

CAIRO (Reuters) - Fallout from the global credit crisis is not over and more consolidation is likely in the financial sector, International Monetary Fund Managing Director Dominique Strauss-Kahn said on Monday.

However, Strauss-Khan said the causes of the crisis that led to the failure of Wall Street giants such Bear Sterns and Lehman Brothers had largely passed. He reiterated his forecast that the global economy would recover in 2009.

"What we see today in Lehman Brothers is something that started months ago," Strauss-Khan told a news conference in Cairo. "So the consequences for the financial sector are not over and we are going to see more of that."

Central banks mobilised worldwide on Monday as stocks sank after the bankruptcy filing of Lehman Brothers and sale of Merrill Lynch, another big U.S. investment bank once deemed too big to fail.

The IMF chief said the financial sector was likely to be smaller after the crisis as a result of more consolidation among big banks.

Bank of America Corp (BAC.N) agreed to buy Merrill Lynch in an all-stock deal worth $50 billion and JPMorgan Chase (JPM.N) acquired investment bank Bear Stearns in March. The purchases signalled a transformation in Wall Street's power structure with major banking groups becoming more dominant.

"Probably the kind of bank we see in the United States but we don't see in Europe for instance -- which are investment banks standing alone -- is the kind of bank which (is) going to be less numerous in the future," Strauss-Khan said.

Strauss-Kahn said the latest losses in the U.S. financial sector and forecasts of an economic slowdown in Europe proved that the IMF was right in its assessment of the size of the problem in the United States and Europe.