NEWS Release - "Banks need to make enough money" Interview with Andreas Dombret published in the 1 August 2016 issue of the German daily newspaper Bild
Interview by Jan W Schäfer
The big German banks, in particular, generated below-average results in the recent stress test. Should people be worrying about their savings?
The stress test demonstrated one thing very clearly. European banks are currently more stable than they were just a few years ago. Needless to say, this also applies to German banks which generally showed themselves to be sound. And to make sure things stay that way, we conduct exercises like the stress test to help banking supervisors to detect weaknesses early on. It is also worth pointing out that a Europe-wide insurance scheme protects personal savings up to the amount of €100,000 per customer per bank.
So where do German banks need to pull up their socks?
Well, even though domestic banks are on a stable footing, they still need to make enough money, just like any other enterprise. And this is proving something of a stumbling block at present. The framework within which banks operate today has changed, with low interest rates, digitalisation, stricter regulation and stronger competition all playing a part. As a consequence, banks urgently need to consider how to align their business models with these developments.
Banks and savers alike feel the pain of super-low interest rates. When will these rates finally start picking up again?
Interest rates are determined by monetary policy, not supervisors. And monetary policy is set with the goal of stable prices in mind. If we look at price developments in Europe, there are no signs of interest rates climbing again quickly any time soon. So we will have to live with low interest rates for some time to come.
Do you rule out the possibility of a bank going bust in Europe?
One of the central tenets of a market economy is that enterprises may become insolvent, banks included. The pivotal issue here is the repercussions of such an event. And to ease matters, Europe has put in place a set of bank insolvency rules that ensure two things. First, taxpayers are largely spared the cost burden arising from such an insolvency. Second, failed banks are forcibly closed, thus limiting the risk of healthy banks going down with them.
page source http://www.bundesbank.de/
