The BoE notes that there are still risks to the financial system but that the "immediate response to the ‘exceptional interventions by governments and central banks’ have been positive" in its twice-yearly financial stability report, released overnight. "Reducing reliance on the official sector as a source of funds is likely to be a significant constraint on banks' activities over the medium term". Banks will need to lower their exposure to short-term wholesale funding and their leverage levels to improve their balance sheets, both "are consistent with a period of tighter credit conditions for the real economy, compared to the period prior to the turmoil". The BoE also believes that it is unlikely that Libor overnight index swap spreads will return to pre-crisis levels as they "reflected an under-appreciation of the risks on banks' balance sheets". However, at the same time, BoE stresses that losses associated with the credit crunch are likely to be smaller than markets currently price in. "Mark-to-market losses have increased substantially since the April Report across the majority of instruments" but "they continue to reflect significant premia for uncertainty about future collateral performance and illiquidity in secondary markets. The economic values of these assets lie significantly above their current market values".