The ECB believes that banks still need impairments

Requirements estimated depreciation banks in the euro area have increased over the last six months even if the systemic risk has decreased, says the European Central Bank (ECB).

It estimates that 553 billion euros the total depreciation for the period 2007-2010, against 488 billion in June The writedowns still to be included in the accounts represent 187 billion euros according to his estimates, against 214 billion six months ago.

"Since the number of impairments in the pipes by the end of 2010 fell only slightly, this means that the remaining losses will be recouped from the profits of banks over a period of time shorter," wrote the ECB its financial stability report.

She adds that the situation of the financial system has improved.

"The tensions on the financial system of the euro area has clearly decreased due to programs supporting financial sector, macroeconomic support and the ongoing economic recovery," she said.

The central bank identifies three significant risks to the financial system of the euro area: a revival of financial stress, exposure to market commercial real estate and Eastern Europe, and a possible case of renewed financial markets.

However, the rising price of movable assets and lower risk premiums suggest standardization, says it by explaining that the clearest signs of a return to normal may occur on private capital markets euro area, which has increased liquidity, promoting lower volatility.

The gradual improvement of the global economic outlook has helped the prospects of stability and financial pressures on the balance sheet fell, says the ECB.

She adds that the adjustment of global imbalances in current accounts has continued, but it is fragile due to cyclical factors rather than structural.

IRREGULAR REPEAT

In the eurozone, the macroeconomic environment has improved, but uncertainties remain, the ECB said in its report.

"The recovery is expected to remain fairly irregular, supported by a number of temporary factors in the short term, but it will probably be affected in the medium term the ongoing process of adjustment of balances in the financial and non-financial economy both within and outside the euro area, "says the ECB.

She also warns against the risk of recovery at two speeds noting that "considerable heterogeneity remains in economic development at national level".

Without speaking directly about interest rates, the central bank believes that the interest rate risk is limited.

"Even if a further decline in interest rates seems unlikely, the relatively low interest rates should continue to support a reduction in debt burden relative to 2008 levels," she said in her report.

Despite the improved outlook, the ECB refers to many risks ranging from debt to defects of private companies.

For non-financial firms, low profit, high indebtedness and dependence on bank financing are the main risks and default rates "corporate" should remain high, the ECB said.

"Over the coming months, the overall balance in the area of non-financial euro area is expected to remain difficult," said she.

"This means that banks in the euro area can expect significant additional writedowns on loans to businesses during the coming year."

The increase in state debt is also a serious cause for concern because it could limit the funding available for the private sector and hamper recovery, says the institution.

Governments themselves, will ensure that the withdrawal of measures to support the economy operates in an orderly manner.

The ECB added that the outlook for bonds in the euro area remain vulnerable to macroeconomic uncertainties.