RTTNews - Monday, Austria's central bank or the Oesterreichische Nationalbank said the country's banks are sufficiently capitalized to cope up with a drastic eastern European recession.

Citing results of its stress test, the OeNB said loan defaults are expected to rise to 10% in Austria and to rise to 20% in emerging Europe.

The central bank also said Austria's top six banks' Tier 1 capital ratios would ease to an average 5.1% in 2010 if they fail to raise capital under a serious stress test due to a rise in bad debt in the country and in the region.

The government has set aside EUR 15 billion to the country's banks to generate capital as part of its EUR 100 billion package.

OeNB Governor Ewald Nowotny said currently the European Central Bank does not need to bypass the banking system to make sure that credit reaches its end-users. According to him, the current measures taken by the ECB would eventually boost credit supply.

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