Frankfurt / Main (dpa) – The Corona crisis is forcing European banks to accelerate restructuring. “The need to address structural problems is now more urgent than ever,” the vice president of the European Central Bank (ECB), Luis de Guindos, warned on Monday.
It is “urgently necessary to eliminate structural weaknesses in the European banking sector by reducing excess capacity and improving profitability to remedy persistently low profitability.”
It is true that the institutes increased their efforts to reduce costs during the pandemic. But you would have to work even harder to achieve greater efficiency. “Consolidation through mergers and acquisitions is another potential way to reduce excess capacity in this sector,” de Guindos said in a written speech at the “Euro Finance Week” conference.
According to the ECB, banks will have to deal with the consequences of the Crown crisis for a long time. The level of profitability prior to the crisis cannot be expected before 2022, de Guindos explained. The Frankfurt-based central bank has also been the central supervisory authority for the largest banks and banking groups in the euro area since November 2014. There are currently 113 institutes, representing almost 82 percent of the market in the monetary area of the 19 countries.
Deutsche Bank chief Christian Sewing also warned the industry at the video conference that it must join forces. Fragmentation is the biggest structural problem in the sector in Europe, highlighted Costura. “More than 5000 financial institutions in Europe is simply too many.” None of the 20 largest banks in the world is already headquartered in the European Union.
Although the industry is proving to be stronger in the Corona crisis than it was ten years ago, Sewing said. “But in many cases we are simply not profitable enough to generate additional capital and therefore additional capacity for our business.” The manager, who ordered a deep restructuring of Deutsche Bank in the summer of 2019, emphasized: “We banks have to keep working on our costs, we have to invest in our technology, we have to be more innovative.”
Above all, banks would have to focus on their strengths, Sewing said. “Only with strong banks and a strong capital market will Europe raise the funds to fight the economic consequences of the corona pandemic.”
When asked about Deutsche Bank’s role in restructuring the sector across national borders, Sewing said that Germany’s largest financial institution is currently “in the hot phase of transformation”: “So we want to face the market. with higher profitability “. In his opinion, Deutsche Bank will need the next 12-15 months to do this.
With the radical restructuring of the group, Deutsche Bank wants to return to the path of success after a series of years of losses. The long-loss business of the in-house investment bank was cut, and the bank pulled out of global equity trading. By the end of 2022, the number of full-time positions in the group will drop by around 18,000 to 74,000 worldwide. In the German domestic market, the institute wants to close one in five branches and reduce the network to 400 locations.
From the point of view of ING Germany head Nick Jue, the trend towards online banking will not reverse even after the corona pandemic. “I believe the new normal will never go away. If you’re used to doing everything digitally, that lasts, ”said the manager. While other institutes are closing branches and cutting jobs, ING has never opened branches in Germany. However, digitization means that some of the employees no longer work at the direct bank. You have to take these people with you on the road and use them for other tasks, Jue said. ING Germany plans to introduce digital advice for clients in late 2020 or early 2021, which should be equivalent to on-site advice.