It is not the only factor needed for reviving the loan business, particularly in the peripheral countries. But it is one of the important ones. Restored confidence in the euro area banking sector should lead to lower funding costs for banks, which should be able to shift their focus back to their core business: lending to firms and households.
Information developed from models that are used to identify sensitivity to market changes in the mix of loans and deposits are now part of asset/liability committee meetings at community banks. As a result, managers can better anticipate changes in net interest income and respond appropriately to their unique competitive conditions.