ECB report warns of banks' weaknesses, loan losses

The European Central Bank's semi-annual Financial Stability report warns that banks face higher-than-usual risks as governments disengage from their financial-sector involvement. Banks "should ensure that they have adequate capital and liquidity buffers in place to cushion the risks should they materialise," it warned, noting they face $110 billion in net write-downs this year. The write-downs, coupled with regulatory pressure on banks to keep leverage low, suggest the sector's profitability "is likely to remain moderate in the medium term," it concluded.

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