The European Central Bank (ECB) noted that even though after July Greece’s expectations to default diminished, the stakes are still high due to concerns over an early and full implementation of the third bailout program.
For what concerns the Eurozone the ECB’s report said that “July’s developments in Greece had only a temporary effect at the stock markets and the state bonds”. The ECB’s report highlighted improvements regarding the ability of the Eurozone banking system to absorb various shocks. It was noted that “both the profitability and solvency of banks improved”.
The challenges Eurozone banks are still facing include: weak economic recovery, low profitability, a high level of non-performing loans and the high debt which still remains in several countries of the Eurozone. It was emphasized that “these factors continue to limit the ability of banks to grant loans and their ability to generate new funds”.