Which brings us to the biggest challenge facing the German banking sector: it appears to be suffering from weak profitability. Supervisors also have a problem with this, as banks’ low profitability limits their ability to retain earnings and build up equity.
Nor is the persistent spell of very low interest rates helping to remedy the German banking sector’s weak profitability – quite the contrary, in fact. Particularly for credit institutions with a heavily interest-driven business model, the ongoing low-interest-rate environment could pose  2  BIS central bankers’ speeches  a serious threat in the medium to long term.