SPENDING cuts and jobs losses at big UK and European banks have not been enough to stabilise their positions, and more will be needed if the economy does not improve soon, according to a KPMG report published today.
Major institutions have “made real progress in strengthening balance sheets and capital reserves,” said the analysis of results of the five biggest UK banks.
But if the recovery does not emerge “more drastic investment bank restructuring” may be needed.
That could include chopping units that sell complex products like bespoke fixed income and credit derivatives, and instead selling high volume instruments.
The report also warned neither banks nor regulators know what the industry will look like in the coming years as banks are squeezed between new rules, demands to lend more and the weak economy.
Meanwhile across Europe, a more drastic restructuring could be due, but has been held up by measures to alleviate the crisis.
“Europe has a lot of banks relative to GDP compared with the US,” said KPMG’s Bill Michael. “But the life-support mechanisms keep them from folding or being taken over, by giving them funding through the back door.”