ECB worried about banks' health, Brexit fallout

European Central Bank governors are concerned about the health of eurozone banks

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European Central Bank governors are concerned about the health of eurozone banks and about the economic fallout from Britain's vote to quit the EU, the minutes of its most recent policy meeting revealed on Thursday.

The minutes were from the meeting of the ECB's governing council in Vienna on June 2, three weeks before 52 percent of Britons finally voted on June 23 in favor of "Brexit".

"In the event that the United Kingdom voted to leave, i.e. a 'Brexit', there could be significant, although difficult to anticipate, negative spillovers to the euro area via a number of channels, including trade and the financial markets," the minutes stated.

Another source of concern for the ECB governors were eurozone banks' efforts to clean up their balance sheets, a process the central bank termed as "laborious," but which it said would be "an important contribution to strengthening the euro area economic recovery."

Specifically, the issue of so-called non-performing loans, or bad debt, needed to be tackled, the ECB said.

"A call was made to address non-performing exposures comprehensively at all levels, also with a view to avoiding renewed fragmentation of the financial systems in the euro area."

The issue of non-performing loans has become all the more pressing in recent weeks as Italy sought permission to provide financial aid and guarantees to its banks, laboring under a burden of 360 billion euros ($399 billion) in bad debt, from European authorities.

ECB governors also repeated a long-standing call for euro area governments to do more to support growth and employment, saying that it was "an opportune time to strengthen investment in the public and private sectors."

"The swift and effective implementation of structural reforms ... would lead to higher sustainable growth in the euro area and make the euro area more resilient to global shocks," the minutes said.

The minutes are published four weeks after meetings and the ECB takes great pains not to name the particular council members who voted for or against specific measures or who expressed specific views.

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