Total global losses from the financial crisis amount to $25 trillion (15 trillion), according to an estimate from the Bank of England. Balance sheets of banks internationally remain weak and leverage high, leaving them sensitive to future shocks.
But the news in the Banks latest Financial Stability Report is not all bad. Market conditions have improved recently and the pace of economic decline is slowing, improving the outlook for banking systems.
While funding fragilities persist, banks will also have to refund the substantial support provided by the public sector. Banks still face pressures in cross-border funding markets and intense competitions for retail deposits.
As long as these bank sheet vulnerabilities persist, there is a risk to the banking system from further adverse economic or financial sector developments, which could in turn affect lending and economic recovery, the report says.
According to the Bank, equity markets have risen by 25% to 35% from its lows in March, recouping about $8 trillion of estimated mark-to-market losses, the report say. Improvement in credit markets has recovered about $2 trillion of estimated mark-to-market losses on debt securities.
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