Results for the second quarter for euro area banks also show an improvement in return on equity. However, both the geographic location and the size of banks remains a crucial determinant of financial performance. The funding situation has also normalised somewhat; still, it remains challenging given persistent fragmentation in funding markets.
Our comprehensive assessment is aimed at completing this ongoing “healing process”, by identifying remaining pockets of weaknesses and prescribing and fostering the necessary corrective actions to overcome them. How those corrective actions should be financed is clear. Private-sector money should be first in line to reinforce the banking sector.