The long-term sustainability of the business models of the banks, and therefore their ability to intermediate effectively, depends on their ability to generate sufficient net income to meet regulatory obligations and support intermediation. To date, there has been a mixed performance: some banks are still contracting, while others are growing slowly in certain areas like consumer lending or fixed-rate mortgages.
This is reflected in recurring pre-provision net revenue remaining unsustainably low for some banks. This is driven, in part, by institution-specific challenges; part is also due to aggregate trends as their main customers – households and firms – are in aggregate continuing to pay down debt, which should be welcomed from a financial stability perspective.