Washington (dpa) - An upswing in the global
economy under way in 2017-18 is lifting the valuations of European banks, but
the sector's stability is still undermined by weak, uncompetitive banks, the
International Monetary Fund has said.
In its latest report on global financial stability, the
Washington-based crisis lender said that foreseeable economic growth will not
be enough to make the region's "persistently weak banks" profitable.
Banks with operations in a single country are especially
vulnerable when their domestic economies are weak. Nearly three-quarters of
such banks in Europe had weak earnings last year, the IMF said.
Eurozone growth is projected at 1.7 per cent this year, similar
to the 2016 rate, before slowing to 1.6 per cent in 2018, according to the
Washington-based crisis lender's forecast.
The European banking sector remains hampered by
"overbanking," the IMF said. Varying among specific countries, the problem
includes banking systems with balance sheets that are "large relative to
the economy," too many weak banks, or unprofitable sectors with too many
branches and too little consolidation.
"Although measures are being taken to address profitability
concerns, more progress needs to be made in reducing overbanking in the
countries with the biggest challenges," the report concluded.
Even Europe's larger, systemically important banks "find it
difficult to keep up with their global competitors," in part because
banking in their home countries is not profitable enough, the IMF said.
"Left unresolved, a combination of weak profits, lack of
access to private capital, and large bad debt burdens impedes recovery and
could reignite systemic risks," the report warned.
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