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You’ve seen the headlines. Now here’s the conclusion of the Bank of England’s latest Financial Stabilty Report:

A necessary repricing of risk and deleveraging is taking place, which will inevitably have costs for some market participants and borrowers. But this adjustment is being hampered by poorly functioning markets. Confidence among market participants has been dented by falls in credit market prices and large mark-to-market losses which are likely to reflect large, and temporary, discounts for illiquidity and uncertainty, as well as expected future credit losses. In effect, risk premia have swung from being unusually low to temporarily too high relative to credit fundamentals. That is leading to heightened concerns about banks’ resilience, continued strains in money markets and reductions in credit availability. That in turn is retarding the return of confidence and risk appetite in financial markets.

The most likely path ahead is that confidence and risk appetite gradually turn as market participants recognise that some assets look cheap on a fundamentals basis. That could generate a virtuous cycle of rising asset prices and improving bank balance sheets, reversing the cycle of the past six months. But there is still a possibility that high risk premia in some markets could persist, undermining confidence and potentially setting in train a further adverse cycle. The Bank’s recently announced Special Liquidity Scheme is intended to help reduce that risk. But banks can also bolster confidence in their resilience by improving their disclosure and by raising capital as a signal of strength in turbulent market conditions. Further ahead, it is important that banks and the official sector respond not just to problems that have surfaced in the current episode, but also tackle the underlying sources of the overextension of credit in recent years.

There’s more. Seventy-seven pages more, in fact. But you get the general gist. Things are going to get better.

We’re not sure we believe it. Robert Peston doesn’t believe it. The BoE does however have a great line in charts. Here’s a couple to get you started.

Related links
Bank signals worst is over - FT.com