Several factors, however, are altering the context in which banks operate: changes in demand for financial services, technological progress and the digital revolution, and the regulatory reforms introduced in the wake of the financial crisis. The profitability of European banks has diminished considerably over the last ten years.
The global financial crisis first hit the large merchant banks, who earn much of their income on the capital market. The recession and sovereign debt crises then took their toll on the balance sheets of banks whose core business is lending.