Dovish ECB to Affect Euro Area Banks’ Profits?

According to ECB Vice President Luis de Guindos, the banking industry's profits could be hampered by weakening economic growth in Europe..

Arslan Butt•Tuesday, June 25, 2019•1 min read

The ECB language has been shifting to dovish recently

According to ECB Vice President Luis de Guindos, the banking industry’s profits could be hampered by weakening economic growth in the Eurozone. The ECB has sounded rather dovish of late, in a bid to combat falling inflation and a possible slowdown in the Eurozone economy.

So far, however, the loose monetary policy has not had much of an effect on Eurozone banks’ profits. But if rates continue in the negative territory for a prolonged duration, it could risk profitability of the banking sector as a whole.

These comments were made by de Guindos while addressing a conference in Rome. Currently, Euro area banks’ return on equity (ROE) is around 6%, less than their cost of capital which is in the range of 8-10%.

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ABOUT THE AUTHOR See More

Arslan Butt

Index & Commodity Analyst

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.