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Still on a diet: European banks continue to retreat

May 23, 2019
Shrinkage – and no end in sight: in the first quarter of the year, the European banks once more saw revenues and costs alike decline compared to 12 months ago (-2% each). Non-interest income was particularly weak. As a result, profitability dipped, with loan loss provisions also rising, albeit from very low levels. Banks tried to make up for the revenue loss by taking more risk and expanding their balance sheets. Total assets and risk-weighted assets both increased by 4%. Consequently, the average CET1 capital ratio fell 0.4 pp yet remained in comfortable territory. [more]

More documents about "Europe"

155 (97-108)
February 6, 2015
With the independence referendum in Scotland and unofficial polls in Catalonia and Veneto, separatist aspirations in Europe were recently given a boost. In regions seeking greater self-determination or even full secession, not only emotional and cultural aspects play a role but also concrete financial motives. Nearly all the regions seeking greater autonomy are among the wealthiest in their respective countries and far outstrip the national average in terms of per capita income. Moreover, some of them are substantial net contributors in regional redistribution systems. [more]
December 19, 2014
The financial crisis has led to substantial reforms of the system of financial regulation and supervision in Europe – not limited to but including deposit guarantee schemes (DGSs), which play a key role in consumer protection and financial stability. The most recent DGS reform follows a gradual approach, i.e. focuses on adapting existing national systems rather than replacing them. Nevertheless, new rules for bank resolution and the emerging Banking Union are considerably changing the environment DGSs operate in. Given the complexity of the new setup, cooperation between the different players in the financial safety net – including DGSs – is indispensable. [more]
December 15, 2014
The integration of road transport into the EU Emissions Trading System (EU ETS) using an upstream approach (with refineries and fuel importers as participants) is superior to the instrument of CO2 limit values for cars on the counts of ecological effectiveness and macroeconomic efficiency. This applies in particular if a cap on CO2 emissions enjoys top political priority. Higher taxes on fuel would also be more appropriate than a further tightening of limit values after 2020/21. Nonetheless, if policymakers should decide that (stricter) CO2 limit values for cars are to remain the instrument of choice after 2021, it would be appropriate to gear them to the (lower) targets in other large auto markets. [more]
December 5, 2014
2014 is witnessing a remarkable reversal in some important European banking trends of the past few years, according to the 9-month results of the continent’s largest banks. This is not solely a positive thing: apart from improvements in core revenues and a return to balance sheet expansion, expense levels are also rising again. Is deleveraging and shrinking over, then? [more]
November 25, 2014
The introduction of a common European unemployment insurance scheme would be a conceivable option to increase the eurozone's resistance to severe asymmetric shocks. This would provide relief in the short term to countries facing cyclically induced higher unemployment. In principle, such a solution could function without redistribution between countries, but its practical implementation would be a complex undertaking. One alternative proposal would be a type of insurance for "catastrophic" shocks that only provides financial support in the event of a very strong surge in unemployment. [more]
October 14, 2014
SMEs’ access to finance remains a pressing problem in many parts of the euro area as SMEs largely rely on bank loans for funding. Our findings show that it is mainly the banks’ own refinancing costs in capital markets and their risk perceptions regarding SMEs which give rise to constraints. Of the steps taken to spur bank lending, the ECB’s LTROs seem to have had limited success. Securitisation of SME loans on the other hand has the potential to bridge the gap between SMEs’ funding needs and the availability of bank loans. Public-sector and market-based initiatives to improve SME financing are of great importance as well: for the former, private-sector involvement is crucial; as for the latter, overall success has been mixed so far. [more]
September 26, 2014
The interest for higher democratic accountability in the EU is stronger than ever. Indeed, there is scope for action for stronger involvement of national legislatures at EU level. Within the time frame of the eighth legislative period of the European Parliament (2014-2019), an interinstitutional agreement is a viable option. This could lay down a working definition of subsidiarity, enhance interparliamentary cooperation, and structure the use of ‘yellow cards’. In the medium term, a stronger role for national parliaments would require outright treaty revision. [more]
September 15, 2014
The future of the British EU membership has become one of the most pressing concerns for the EU. The EU-British relationship has always been one of special character but a number of recent developments have led to a ‘Brexit’ gaining momentum. Only the UK itself will be able to rationalise the domestic debate on EU membership. Economically, Britain and the EU are inextricably linked. Realistic estimates predict losses in the range of 1 to 3% of British GDP in case of a Brexit. Likewise, the Single Market would shrink by 15%. [more]
August 20, 2014
The half-year results of large European banks offer ammunition to both optimists and pessimists: loan losses and administrative expenses are shrinking, but so are total revenues. Net interest income, the sickly child of recent years, finally seems to be stabilising; however, net income is down again to poor levels. The state of an industry with two distinct faces. [more]
July 25, 2014
Sub-sovereign bonds are a segment that has attracted little attention to date. Bonds are the dominant form of funding for Germany's Länder, though, and they also play an important role for the regions in Spain. While the Länder benefit from Germany’s excellent sovereign rating, only those Spanish regions not forced to request financial assistance from the central government at the height of the debt crisis have recently been able to obtain financing via the capital market. In France the issuance by the municipalities is likely to increase due to the newly established Agence France Locale. A local authority finance agency is also in the process of being introduced in the United Kingdom. The importance of the sub-sovereign bond market crucially depends on country-specific institutional arrangements. [more]
July 14, 2014
Migration patterns within the eurozone have changed fundamentally. While prior to the crisis many citizens from Central and Eastern European EU countries migrated to Spain and other peripheral countries, the westward migration is now primarily directed to the core. The crisis has also triggered increasing migration from the periphery to the core. Eurozone migration acts as a sensible adjustment mechanism in the labour markets. In Germany it contributes to the reduction of bottlenecks in the market for qualified labour, whereas in the GIPS it functions like a safety value. Migration also fosters growth in the host countries, while the impact on the GIPS is ambiguous. Emigration reduces persistent structural unemployment especially in problem sectors like construction. It also helps to rein in public spending. However, the huge swing in the migration balance, especially in Spain, weighs on domestic demand. Higher remittances would be helpful to mitigate the shock from the outflow of purchasing power. While fears of a brain drain are overstated, lasting migration deficits would accelerate population ageing in the periphery. [more]