Bank

• - Euro area systemic stress remained low in past six months amid improving, but still subdued, economic growth
• - Financial markets show continued asset price rises and bouts of volatility, but without generalised overvaluations
• - Challenging operating environment for euro area banks and insurers, while rapid growth of shadow banking sector continues

Croatian Finance Minister Boris Lalovac is running against the clock to find a solution to the problem of citizens who took out loans in Swiss francs that have now become too costly to repay.

The government intervened in January, freezing the exchange rate with the franc for a year, after it soared in value by 20 per cent, in a move to stabilise the problem of rising interest rates.

The prospect of Greece leaving the eurozone no longer represents a risk to the French banking sector, ECB governing council member Christian Noyer said on Tuesday.

Noyer, who is also governor of the French central bank, said that the French banks had drastically cut their exposure to the country in recent years.

European bankers and officials sought to minimize the wider risk from a possible Greek default as talks about the country’s fiscal future remain deadlocked, with both sides waiting for the other to blink first.

The Central Bank warned in its annual report issued on Monday that high interest rates are causing a decrease in liquidity which could lead to insolvency, while also contributing to last year's decline in investment activity.

"In the long run, that leads to stagnation and a recession in economic activity," the report said.

By Yiannis Papadoyiannis

Greek banks are facing the specter of nonperforming loans climbing to 100 billion euros ? or 45 percent of all loans issued ? in the coming months owing to the seemingly endless uncertainty in the local economy.

By Yiannis Papadoyiannis

The European Commission?s Directorate-General for Competition is to ask Greek banks to revise their restructuring plans in light of the rapid deterioration of financial conditions in the country.

Moody's Investors Service has said its outlook on Greece's banking system is ?negative,? owing to acute deterioration in funding and liquidity.

?These pressures are unlikely to ease over the next 12-18 months and there is a high likelihood of an imposition of capital controls and a deposit freeze,? the credit ratings agency said in a report released Wednesday.

Deputy Prime Minister Ali Babacan has said Turkey, Indonesia and the Islamic Development Bank have accelerated their efforts to establish a "megabank" with the aim of creating a platform to serve as a "central bank" for the world's Islamic lenders, as reported by Reuters. 

One of Turkey?s largest state-owned banks, Ziraat Bank, was authorized by the country?s banking regulator to begin operations in its Islamic banking division, according to the government?s official gazette on May 14.

The Banking Regulation and Supervision Agency (BDDK) issued a certificate giving permission to Ziraat Bank to commence operations as an Islamic bank.