The Bank of England (BoE) has warned banks will lose as much as one-fifth of their profits if commercial property crashes.
It noted in its Financial Stability Report the banks had continued to invest in commercial property and could face serious losses.
"The unavoidable correction after the credit boom is proving protracted and difficult," noted John Gieve, deputy governor for financial stability.
Commercial property in London has struggled during the crash, although the City remains a prime location for foreign investments and business.
"To reinforce those prospects of recovery, we need to restore confidence in the banking system," said Mr Gieve.
He announced a liquidity scheme, which could improve the position of the banking system and increase confidence
"So, while there remain downside risks, the most likely path ahead is that confidence and risk appetite will return gradually," he added.