Global economic conditions remain subdued despite a recent rally in financial markets and policymakers need to act to address underlying stability risks, including dealing with weak banks, a top IMF official said on Tuesday.

David Lipton, the International Monetary Fund's first deputy managing director, said further improvements in the economic outlook will require repairing bank balance sheets, and in some cases banks may need to be shut.

"Banks will need to remove the dead wood and address asset quality problems, with some having to increase provisioning for bad loans and add fresh capital," Lipton said in prepared remarks to the Chartered Financial Analyst Society.

"Some banks will prove to be non-viable and will need to be wound down in an orderly manner," he added.

(Reporting by Lesley Wroughton; Editing by Eric Walsh)