Most Eurozone banks are too weak to give out loans and support any economic recovery, a top International Monetary Fund (IMF) official warned yesterday.
The banking sector in the euro area is only just getting to grips with bad debts and inefficiencies, according to Jose Vinals, the director of the monetary and capital markets department at the IMF.
“If you see the asset quality review and the stress tests [in Europe], this is something that happened in the US five years ago,” Vinals told the British Bankers’ Association conference. “There will be a mandatory re-capitalisation plan for the banks after the exercise is concluded – this happened in the US five years ago. In the US, there was a significant restructuring, with mergers and acquisitions. All of these things still need to happen in continental Europe.”
The IMF says that more than 70 per cent of Eurozone banks are still not making enough money to build capital levels and increase lending.