As the European banking system faces a challenging mix of low growth, high volumes of non-performing loans, a low interest rate environment and intense competition, the comprehensive SREP process is of paramount importance. Banks might embark on dangerous business strategies or reduce costs by reducing staff for risk management.
Rises in a range of raw materials prices, driven mostly by global trends, are also having an impact on the cost of producing goods in Australia. In the opposite direction, the subdued world price environment of 1997 and 1998 helped contain any inflationary fallout from the lower exchange rate we experienced during the Asian crisis.