Eurozone banks face additional losses of more than $283bn this year and next as continental Europe’s severe recession intensifies strains on its financial sector, the European Central Bank has warned.

The fates of the eurozone economy and its banks have become increasingly interlinked, the ECB reported on Monday in its latest “financial stability review” with banks losses expected to be focused on their loan exposures. Risks to the stability of the financial sector remained high, it said, while “uncertainty prevails” over the shock-absorbing capacity of the banking system.