Eurozone banks face additional losses of more than $283bn this year and next as continental Europeâs severe recession intensifies strains on its financial sector, the European Central Bank has warned. The fates of the eurozone economy and its banks have become increasingly interlinked, the ECB reported on Monday in its latest âfinancial stability reviewâ with banks losses expected to be focused on their loan exposures. Risks to the stability of the financial sector remained high, it said, while âuncertainty prevailsâ over the shock-absorbing capacity of the banking system. Its stark comments could fuel calls for European politicians to step up the âstress-testingâ of the Continentâs banks to restore confidence in the system. Weaknesses in continental Europeâs banks have come under increasing global scrutiny recently, with finance ministers facing pressure at a G8 summit in southern Italy at the weekend to follow the lead set by the US. Lucas Papademos, ECB vice-president, said that âa negative interplayâ between the financial sector and the economy had become clearer since the start of this year. He stopped short of calling for more rigorous stress testing or the publication of review results saying the issue âremains the responsibility of national authoritiesâ. The ECB, which acts as the monetary authority for the 16 countries that share the euro, is not a bank supervisor. However Mr Papademos repeated the ECBâs plea for banks to ensure they had sufficient capital and liquidity buffers and to take advantage of government support schemes. Despite the scale of the bank losses that the ECB saw as still facing eurozone bank, it was strikingly less gloomy than the International Monetary Fund, An IMF report in April put expected write-downs this year and 2010 at US $750bn, although taking account of loss provisions and write-offs up until May this year would reduce that to about $540bn. The gap was due to different assumptions, for instance on the performance of loans. The ECB also expressed confidence that the eurozoneâs largest banks could endure any further economic deterioration, saying âmost â¦ appear to be sufficiently well capitalised to withstand severe but plausible downside scenariosâ. Among the main risks to the eurozoneâs financial system identified were: a renewed loss of confidence in the financial strength of large banks; balance sheet strains facing insurers; larger-than-expected further falls in US house prices, and âan even more severe than currently projected economic downturn in the euro area,â Mr Papademos said. Banks also faced the risk that they had become âpossibly too reliantâ on emergency liquidity provided by central banks since the start of the financial crisis, according to the ECB report While attention had so far focused on write-downs related to asset-backed securities and derivatives, the report said that âincreasingly â¦ attention is focusing on corporate debt and the likely loan losses that may materialise as the turmoil continues and the real economy endures a significant slowdown.â The ECB does not expect the eurozone to return to positive quarterly growth until the middle of 2010. The ECB also warned about the threat posed by an intensification of the difficulties facing central and eastern Europe economies. But it concluded that even if the âworse caseâ scenario materialised this year in the European Unionâs newest member states, Asia and South America, the balance sheets of the eurozoneâs largest banks would, overall ânot be unduly strainedâ â although some individual banks would be significantly worse affected. http://www.ft.com/cms/s/0/34f0b6c0-59c5-11de-b687-00144feabdc0.html?nclick_check=1 Is that better compared to the US and UK or worse ?