IMF: Banks Need Overhaul to Resume Lending

The IMF's Financial Stability report highlights ongoing challenges in the banking sector six years after the global financial crisis. It notes that some banks, particularly in Europe, struggle to support economic growth due to insufficient profitability. The report discusses the uneven impact of low interest rates, with US corporate investment recovering while European investment remains sluggish. Additionally, it warns of rising liquidity risks and increased market concentration. A significant concern is that many large banks have a return on equity that fails to meet shareholder capital costs.

What is the main reason some banks are unable to support economic growth six years after the financial crisis?

• They are focusing on international markets.

• They are investing too much in technology.

• They have too many employees.

• They are not profitable enough to boost lending.

How have low interest rates affected corporate investment in the US?

• They have boosted corporate investment above pre-crisis levels.

• They have had no impact on corporate investment.

• They have decreased corporate investment.

• They have only benefited small businesses.

What percentage of European banks cannot achieve credit growth of more than 5%?

• 60%

• 40%

• 20%

• 80%

What is a concern regarding the fund management industry according to the IMF?

• It is becoming less profitable.

• It is expanding too rapidly.

• It is not investing in sustainable projects.

• It is becoming more concentrated.

What is concerning about the return on equity for the largest banks?

• It exceeds the cost of capital.

• It is lower than the cost of capital.

• It is equal to the cost of capital.

• It is not a concern.