Loss rates on most types of loans seem to be peaking, and, in the aggregate, bank capital ratios have risen to new highs. However, many banks continue to have a large volume of troubled loans on their books, and bank lending standards remain tight. With credit demand weak and with banks writing down problem credits, bank loans outstanding have continued to contract.
On the left-hand side of my next slide you can see that banks’ excess liquidity is often much less evenly distributed than at the country level. In Italy, for example, the top ten banks together hold 80% of excess reserves – a concentration level that is, in fact, higher than in the United States. In France, the top 10 banks hold 70%.