European banks decade after the financial crisis

European banks decade after the financial crisis

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Although better economy helps banks to cope better, a decade after the financial crisis, lenders in the euro area are hesitant in its assessment of the recovery of the sector, announced the Bank for International Settlements (BIS).

“The financial sector is facing an improving but still challenging environment,” commented by the BIS in its annual report.

“The short-term economic outlook has increased significantly and financial headwinds turned in the right direction for many developed economies,” the report says.

Banks should use the “dividends of growth” to strengthen their resistance to market shocks and restructure their business models, adds the text.

A better economy will stop the increase in non-performing loans whose payments have shrunk.

“This means that the banking systems in some cases still seem greedy of further deterioration in credit quality. In a number of eurozone countries, for example, the share of non-performing loans remained consistently high, “the report said.

Authorities in the euro area had to intervene in the case of the Spanish Banco Popular earlier this month and faces pressure to deal with crises in some troubled lenders in Italy.

But economists argue that Europe has been affected by two crises – a financial and other related debt of eurozone countries.

Meanwhile, US banks benefit from its main market, which is in a strong phase of the economic cycle, although the eurozone economy is recovering. However, Europe is seen as slower and less aggressive in dealing with troubled banks, compared with the US, but the region is still “bursting with banks.”

Bank for International Settlements says that creditors around the world have made progress in diversifying profit but market valuations for many banks still suggest investor skepticism.

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Zac Berry is presently a full time editor at Market Morning. He covers the M&As and follows live market commentary. Before joining Markets Morning, Zac Berry worked with a start-up, where he worked in the capacity of a Team Leader tracking company events and results. Born in the U.A.E, he spent most of his growing up years in Dubai. Currently, he resides in U.S. and is pursuing his charter in Accountancy.

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