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Low interest regime, regulatory morass put squeeze on ESBG member banks



A low interest-rate environment and regulatory red tape pose challenges to member savings and retail banks, this according to an exchange among the ESBG Presidents' Committee held this week. ​








​​​​BRUSSELS, 9 September 2015 – ​​​​​​Led by the trade body's recently appointed President Isidro Fainé, the committee explored low-interest rate policy, especially as it applies to bank performance. When inflation is factored in, low interest rates levels translate into negative real interest rates, putting a tighter squeeze on already narrow bank margins – how banks generate a substantial part of their income. 

Low rates also chip away at financial asset values, most of which are held by private households in the form of bank deposits and government securities. Low-interest rates also drag down deposits levels, a core source of funding by many members, by swaying people to save less. They also have an adverse effect on long-term savings such as pensions. 

The Committee also calls for a cut in regulatory red tape, which puts a squeeze on margins and hinders loan activity to small and medium-sized business (SME) – the backbone of the EU real economy. Policy measures must encourage, not encumber, savings and retail banks to play their special role within a diverse European banking sector.​


Regulation; Supervision; Financial supervision; Long-term financing; SME finance; Capital Markets Union