The Eurozone has too many banks. This was clearly stated by the president of the European Central Bank Mario Draghi, according to whom this would be one of the key factors causing the low profitability of continental credit institutions.
During the press conference called by the European Systemic Risk Board, the council that monitors the systemic risks of the European Union, the number one of the Eurotower rejected to the sender the accusations made against the ECB by exponents of the continental banking sector who, in recent days, they have argued that low interest rates and above all negative rates on deposits (in other words Quantitative Easing), have caused the compression of interest margins, thus reducing the profitability of European banks.
Draghi then recalled that rates have now been falling for more than two years due to various factors. According to its president, the bazooka launched by the European Central Bank in March 2015 may have contributed to the continuation of the trend, but according to research carried out by Frankfurt, the margin squeeze is offset, in the balance sheets of banking institutions, by capital gains on their portfolio of fixed income securities, from increased lending, as well as declining possible credit losses.
The fact that there are too many of them in the Eurozone weighs down the level of profitability of EU banks above all else. A very high number that increases competition, reduces efficiency and raises costs. Banks and financial institutions and some insurance companies that have pushed on guaranteed return life insurance policies will have to redesign their business model.
