The Bank of England has warned that UK banks still face serious challenges and need to build up their reserves further in order to cope with them.

In its Financial Stability Report, the Bank says the financial crisis has raised doubts about the strength of some European banks.

Exposure to these institutions represents a danger to domestic banks, it warns.

It says banks must meet "demanding future regulatory requirements."

Although the report says that banks have "raised their capital and liquidity buffers substantially", it says they will have to do more to meet the new regulatory regime.