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MNI: ECB Mersch - Banks Must Consolidate, Refine Biz Models

MNI (London)
By Christian Vits
     FRANKFURT (MNI) - European banks need to further consolidate and work on
their non-performing loans, European Central Bank Executive Board member Yves
Mersch said Monday.
     "Work remains to clear up the legacy of the crisis, particularly in terms
of the overhang of NPLs," Mersch said in a speech in Slovenia. 
     "Regulation alone is insufficient, and further effort is required of banks,
in terms of both consolidation and refining business models, to return the
sector to sustainable rates of profitability," he added.
     Europe remains overbanked, he noted. Although progress has been made on
this front, with 25 percent fewer credit institutions in the euro area now than
in 2008, "there is considerable scope for consolidation within some countries
and across borders," Mersch stressed.
     Payment services is a further area where regulatory advances are of
themselves insufficient to provide a working system that operates in a smooth
and efficient way, that is still safe and respects European privacy provisions,
he said.
     Banks face various challenges, such as the weak financial performance of
the sector, with low price-to-book ratios and meagre profitability, Mersch
underlined. 
     "Compared with the pre-crisis status quo, profound changes in the sector in
terms of structure and business models will be needed to tackle those
challenges," he said.
     The stock of NPLs remains high in some countries and continues to depress
bank profitability today, Mersch said. 
     At the end of 2016, the stock of gross NPLs in the EU banking sector was
around E1 trillion. "This NPL overhang is tying up bank capital in failed or
failing ventures and preventing the efficient flow of new lending to profitable
projects," he added.
--MNI Frankfurt Bureau; +49 69 97782671; email: christian.vits@marketnews.com
[TOPICS: M$X$$$,MC$$$$,M$$EC$]
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com

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