Euro area banking sector gathers strength

Abstract

Increasing market uncertainty over the condition of banks in early 2016 was not due solely to concerns about global economic growth but also above all reflected concerns about banks’ non-performing loans and declining profitability amid low interest rates and subdued growth. Nonetheless, the condition of the European banking sector is gradually improving, despite major cross-country differences. Notwithstanding the positive developments, banks nevertheless remain vulnerable to deteriorations in the operating environment.