Mario Draghi: Europe has too many banks
The eurozone has too many banks, Mario Draghi has said, blaming overcapacity rather than the European Central Bank’s monetary policy for low profits among commercial lenders.
Speaking at a conference of the European Systemic Risk Board on Thursday, Mr Draghi took on critics from the banking sector, who have blamed the ECB’s negative interest rate policy for squeezing their margins, reports Claire Jones in Frankfurt.
The ECB president pointed to a report saying the banking sector had “outgrown capital markets” and said the high number of banks was a big factor on the low levels of profitability in the sector.
The ECB’s deposit rate is currently at minus 0.4 per cent, meaning the central bank imposes a levy of the same amount on a portion of reserves parked by lenders at the central bank.
Overcapacity in certain banking sectors also meant their costs were too high, as an environment of too many lenders makes it difficult for banks to pass on costs to their customers, added Mr Draghi.
The problem with over reliance on banks was that their lending patterns tended to exacerbate the financial system’s tendency towards boom and bust. On the other hand, capital markets “were a useful spare tyre”, said the Italian.
The eurozone’s capital markets, in which firms can issue bonds and equities, are much smaller than those in the US — which the ECB believes impedes the effectiveness of its quantitative easing policy of corporate and government bond buying.
Mr Draghi’s comments come after the ECB revealed that its latest policy measure to boost bank lending by providing cheap loans (TLTRO-II) had attracted a take up of €45bn in its latest round.
he maybe right..but who helped prop a whole heap of them up as zombie banks?
“The ECB president pointed to a report saying the banking sector had “outgrown capital markets” and said the high number of banks was a big factor on the low levels of profitability in the sector.”
some bubble popping will cull the herd i reckon..