miércoles, 15 de octubre de 2014

miércoles, octubre 15, 2014

International Business

E.C.B. Details Somber State of Europe’s Banking System

By JACK EWING

OCT. 13, 2014

 
FRANKFURT — Europe’s banking system is smaller and less dependent on borrowed money than it was in 2012, but it is still burdened by bad loans and is not very profitable, the European Central Bank said on Monday in a report that portrayed eurozone lenders as still in recovery after the financial crisis.
 
The report, based on data through 2013, provided an overview of the health of the eurozone banking industry less than two weeks before the E.C.B. is scheduled to disclose the results of a thorough review of the zone’s 130 largest banks. The document issued on Monday could reinforce expectations that the review, to be released on Oct. 26, would expose a significant number of weak banks that would be obliged to raise more capital or close down.
 
“The subdued financial performance of the euro-area banking sector observed since the onset of the financial crisis continued in 2013,” the central bank said in its 61-page report.
 
The document also contained some positive news. By several measures, banks in the eurozone are, as a group, less exposed to risk than they were a year earlier, the report said.
 
There are fewer banks — 5,948 in 2013, compared with 6,100 in 2012 and 6,690 in 2008 — as institutions closed or were acquired. Europe is regarded as having too many banks for the size of its economy, so a decline in the total number should make it easier for the remaining lenders to be profitable.
 
The total value of outstanding loans and other bank assets also declined at the end of 2013, the E.C.B. said, to 26.8 trillion euros, or $33.8 trillion, from €29.6 trillion in 2012 and €33.5 trillion in 2008. Much of the decline came from large banks, particularly in Germany and France, that cut back their holdings of derivatives, considered a particularly risky asset.
 
In another sign of reduced risk, banks said more of their funding came from customer deposits, and banks reduced their dependence on funds from money markets.
 
As a way for banks to raise funds to lend to customers, deposits are considered more stable than money markets, which can seize up in a crisis. A case in point was Hypo Real Estate in Germany, which before the 2008 crisis was highly dependent on short-term funding from wholesale money markets. When wholesale funding dried up suddenly after the failure of Lehman Brothers in 2008, Hypo Real Estate required a government bailout to survive.
 
Likewise, banks increased the proportion of their own money, as opposed to borrowed funds, that they used to conduct business. The proportion of capital to assets rose to 13 percent from 12.4 percent in 2012, adjusted for risk, the central bank said. Banks achieved the increase by reducing their total assets or, in some cases, by selling new shares to raise fresh capital.
 
Despite signs of progress in the eurozone banking industry, the E.C.B. report made it clear that lenders still faced severe problems, especially in crisis countries like Greece and Italy.
The number of problem loans continued on a steady rise that began in 2008, the report said. Despite signs of stabilization in some countries, “the turning point does not yet appear to have been reached,” it said.
Eurozone banks are also not very profitable, the central bank said. Banks in Cyprus, Ireland, Italy, Portugal and Slovenia lost money on average, and in many other countries profit margins were slender.
 
The E.C.B. acknowledged that its monetary policy was partly to blame. With official interest rates close to zero, banks earn lower margins on the loans they issue.
 
But problem loans also hurt bank profit, the E.C.B. said, as did the cost of past wrongdoing. While the report did not mention individual banks, institutions such as Deutsche Bank in Frankfurt have paid billions in fines, settlements and legal fees related to their conduct in the years leading up to, and sometimes after, the financial crisis.
 
In June, the French bank BNP Paribas agreed to pay an $8.9 billion penalty and plead guilty to charges that it transferred billions of dollars on behalf of Sudan and other countries blacklisted by the United States.
 
On the bright side, the E.C.B. said, the banking sectors in Spain and Latvia regained profitability.

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