Rating agency Moody’s gave a bleaker and bleaker outlook for the global banking sector.
The agency predicts that the banking sector would suffer due to persistently low and even negative interest rates.
“The growing risk of recession in the United States and Europe, coupled with the situation in Pacific Asia and emerging markets, will lead to a deterioration in the quality of credit and an increase in provisions,” says Moody's analyst Simon Ainsworth.
“Trade tensions between the United States and China look to continue, with negative consequences for banks in those countries, as well as for other economies geared towards export and banks that finance trade,” Moody’s said.
A possibility of a resurgence in expansionist political monetary policies, which have led to a drop in interest rates over the last few years, has not made things any easier for the sector. Ainsworth added that the use of negative interest rates in certain regions, increases the pressure on banks and affects their profitability.
The agency says establishments with high running costs will be affected most, which raises questions about the sustainability of certain activity models.
The Brussels Times