Bond sales risk for European bankers

FRANKFURT - Europe's banks will have to write off 195 billion euros ($237 billion) of bad debts by 2011 and their ability to sell bonds may be curtailed as governments finance fiscal deficits, the European Central Bank (ECB) said.

With governments facing "heavy financing requirements over the coming years" there is a "risk of bank bond issuance being crowded out", the Frankfurt-based ECB said in its biannual Financial Stability Report on Monday.

"The risk that this implies for bank funding costs also raises the possibility of a setback to the recovery in banking sector profitability."