These bank competitors have boomed in the last decades, accentuating the competitive pressure on the traditional banking business. Fourth, retail lending, and especially lending to SMEs, remained untouched from the competition of either other financial intermediaries or foreign banks. However, given the over-capacity of most domestic banking sectors of euro area, retail lending is likely to undergo intensified competition among domestic banks.
Like any business that is confronted with new competitors, banks reassess their activities. For instance, we observe in most countries that banks have been able to generate income by entering into the business of their competitors. Banks actually have offered mutual funds and other portfolio management services to the customer network acquired via their traditional deposit taking and lending activities.