ECB: Banks' Potential Write-Downs To Increase Further

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The potential write-downs of euro area banks on securities and loans was estimated at EUR 553 billion for 2007 to 2010 period, which was EUR 65 billion higher than the June 2009 estimate, the European Central Bank reported Friday. This increase was driven by a higher estimate of potential write-downs on commercial property mortgages and also by the inclusion of an estimate of write-downs on securities originated in Central and Eastern Europe.

The ECB said euro area banks could face cumulative total losses of EUR 198 billion on their exposures to securities, and losses of EUR 355 billion on their loan book exposures for the period 2007 to 2010. The potential write-downs of euro area banks could reach EUR 187 billion until end-2010.

Although the road ahead is likely to be uneven, the latest Eurosystem staff macroeconomic projections show a gradual recovery in 2010, ECB's Vice President, Lucas Papademos said.

The central bank said banks should ensure adequate capital and liquidity buffers. Some banks, especially those received state support should restructure fundamentally, the ECB said in its Financial Stability Review. Further, banks should take full advantage of the recent recovery in their profitability to strengthen their capital positions.

The potential write-downs of euro area banks on securities and loans was estimated at EUR 553 billion for 2007 to 2010 period, which was EUR 65 billion higher than the June 2009 estimate, the European Central Bank reported Friday. (Market News Provided by RTTNews)