RTTNews - In a report on the world's financial recovery released Monday, Moody's Investor Service said although the global banking system showed signs of improving, it still not out of the woods yet.

Despite general signs that the world's economy is stabilizing, and a profitable quarter for some banks, most are facing significant hurdles on their path to economic recovery, Managing Director Greg Bauer said.

Bauer said it was encouraging that many banks have recently demonstrated some signs of regaining their strength, particularly since April, when financial institutions were finally able to access capital markets, including the common equity market, on their own, without direct government backing. Since then, bank managements from the United States to Europe and Asia have been able to raise substantial amounts of funds across the full range of seniority classes, the director said.

However, financial fundamentals were still on the downward slope, mainly because of the delay that exists between the end of a recession and actual charge-offs, Bauer added.

The only short-term positive bank rating actions that are likely will be outlook changes, from negative to stable or to positive, Bauer pointed out, adding that the potential for upgrades is unlikely until 2010 without strong evidence of a sustained economic recovery.

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