Retail or Not Retail - Have European Banks Become More Retail on the Wake of the Crisis?
Posted: 21 Oct 2017
Date Written: June 1, 2017
Retail deposits represent about 30% of total European banking assets. The bulk of the balance sheet of banks (about 70%) comprise non-retail loans and deposits (e.g. interbank loans and deposits, loans and deposits from insurance corporations and pension funds and loans and deposits from non-residents) and other wholesale and investment activities (e.g. holdings of securities, hedging services, issuance of bonds). At country level, there is a clear divide between emerging European countries, where retail loans and deposits represent more than 50% of total assets, and Western European countries, where retail loans and deposits represent less than 30% of total assets.
Within this context of a preponderance of wholesale assets and liabilities, a significant evolution towards a more retail orientation of banks is observed since the outbreak of the crisis. This was mainly achieved through a sustained increase in retail deposits, while the evolution of retail loans was more mixed.This increase in retail deposits implies a substantial shift in the sources of funding used by banks and, therefore, in the own nature of EU banks. Market forces (including changes in investors’ preferences) and new regulation have been the main drivers of such shifts.
Keywords: Retail banking, Bank business models, European Union, Financial System
JEL Classification: G21, M20, M41, E66, G11
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