Banks will have to adjust to the cumulative effect on their business of new capital requirements which are being introduced as part of the policy response to the crisis. They will also need to adapt balance sheets and business strategies to their own institution’s experience of the crisis.
The euro area economy is slowly starting to gain momentum, gradually picking up the pace towards recovery. This is the opinion of the Chief Economists of European banks who make up the European Banking Federation’s EMAC Committee, as confirmed in their Economic Outlook for 2010, published today.
Indeed, the massive monetary and fiscal policy impulse provided by the European Central Bank and governments in 2009 will prevent the EU from experiencing a more prolonged recession. “We know that this recovery will, however, not be an easy one”, declared Alejandra Kindelan, Chair of EMAC and Senior Director of Economic Studies of Grupo Santander. “This is particularly underlined by the fact that the stimulus will have to be withdrawn; furthermore, the uncertainty around the impact of the timing and speed of exit strategies has consequences for economic actors’ behaviour and markets.”
EMAC members highlight that, on the other hand, increased trade linkages are a positive factor in the rebound, as they enable the euro area to react more quickly than expected to the revival in activity elsewhere. They also see the revival in exports towards the end of 2009 and into 2010, thanks to sustained growth in Asia, as one of the core drivers of the recovery.
On the issue of credit, they stress that credit demand is weakened by the recession. EMAC members add that “Banks will have to adjust to the cumulative effect on their business of new capital requirements, which are being introduced as part of the policy response to the crisis. They will also need to adapt balance sheets and business strategies to their own institution’s experience of the crisis”.
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