European Central Bank Issues Warning

The European Central Bank has placed a warning that the current financial crisis which has affected many European banks may not yet be over. Their statement comes amidst a time when European economies have started to see significant growth thanks to government efforts to stabilize and support banking systems with numerous aid measures such as financial bail-outs.

During their announcement the European Central Bank stated that banks would effectively have to write-off billions of debts during the next 18 months. They also said that this could lead to significantly more write-offs by 2010. Whilst there has been evidence that economies are finally strengthening, the writing down of many bad debts is still continuing and will stay at its current pace for the near future.

ECB analysts have forecasted that the total sum of write-offs including those already made by financial institutions could reach in excess of over $649bn before the end of 2010. This comes amidst many government attempts to bail out financial institutions and provide support to banks, and also by issuing loan guarantees.

Reports say that the financial institutions own monetary lending habits, have been mostly responsible due to their tendencies to give risky loans to borrowers. This has been seen as one of the main reasons for the economic downturn, and with Governments forced to buy-out many banks, remaining commercial financial institutions have been resisting state aid in order to stay independent, against the advice of the European central bank, who advised that all banks take full advantage of aid programmes as many economic experts believe that the only way to secure an economic reversal, is to stabilize the banking sector and focus on economic growth.

Despite ECB warnings, economies have seen growth and perhaps a warning shot from the ECB was necessary to stop over-optimism and ensure an air of cautiousness remains.

No related news.