Banks in the UK including Royal Bank of Scotland (RBS)and Lloyds are vulnerable to relapse in funding markets and credit conditions, ratings agency Standard & Poor's has said.
Concerns have also recently been raised regarding the problems such organisations may encounter when trying to refinance at low interest rates.
As the banks maintain provisions for bad loans, there is a limited scope for them to increase earnings over the next two years, the ratings agency explained.
"We consider that UK banks will remain pressured by elevated loan impairments. We consider that the weak UK economy will continue to hinder the credit profile of the UK banking industry," S&P's credit analyst Nigel Greenwood commented.
According to S&P, the slow economic recovery that is anticipated could "prolong the period in which losses are elevated relative to historic averages".
Last month, RBS revealed annual reported annual losses of £6.3 billion due to a mountain of bad debts.
