The world's battered financial system is nursing estimated losses of $2.8 trillion (1.8 trillion pounds) but global intervention should bring about stability, the Bank of England said on Tuesday.

Tentative signs have emerged that lending among banks is resuming, the Bank said in its twice-yearly Financial Stability Report.

"Exceptional interventions by governments and central banks should help stabilise the banking system in the period ahead," the Bank said.

"While there are still risks in the wider financial system, the immediate response to the measures has been positive."

In April, the Bank gave a fairly upbeat assessment of how severely the credit crunch would impact markets and the wider economy, but the central bank's latest report is more cautious.

"The instability of the global financial system in recent weeks has been the most severe in living memory," said Bank Deputy Governor John Gieve. "And with a global economic downturn underway, the financial system remains under strain."

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