In the short term the recovery of profitability has been made harder by the repeated calls for a strengthening of capital, and more generally of loss-absorbing instruments, from the supervision and resolution authorities, also in order to comply with increasingly stringent rules. Regulatory changes will reduce banks’ riskiness, endowing them with greater loss absorption capacity, increased liquidity and lower financial leverage.
This will stabilize the entire system, making it more resilient to a crisis.