Ladies and gentlemen,

It is a pleasure to be here this morning to open this conference on the “The Future of Banking”. What I would like to discuss in my remarks is the challenges facing the European banking sector and the right policy responses. The main point I would like to make is that we need a balanced approach – supporting the healthy forces of creative destruction, while at the same time protecting consumers and the essential functions of banks in servicing the economy.

The future for the European banking sector is currently clouded in uncertainty. European banks are coming out of the crisis facing disruptive forces from all sides. They confront three main challenges to their business models.

The first is dealing with the legacy effects of the crisis on their balance sheets.

Since 2009 banks have been going through an arduous process of restructuring and deleveraging: shedding non-core business lines, writing down impaired assets and increasing provisions. This process has been costly both in terms of lower profits and diverted management time. Many banks also still have to work through their large stock of non-performing loans (NPLs), which further weighs on earnings prospects. Sufficient recovery from NPL resolution is hindered by slow national insolvency procedures for firms and an underdeveloped European distressed debt market.

The second challenge is adapting to the new wave of regulation since the crisis.

Banks have been required to improve both the quantity and quality of their capital, which has, in the short-term at least, led to...

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https://www.ecb.europa.eu/press/key/date/2015/html/sp150310.en.html

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