ECB’s Guindos Says Low Bank Profitability Remains a Concern

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Low bank profitability in the euro area remains a concern, according to European Central Bank Vice President Luis de Guindos.

In a speech in London Wednesday, Guindos said consolidation in the sector remains necessary, and that mergers could be cross-border or national. The official was speaking after a proposed merger between Deutsche Bank AG and Commerzbank AG broke down last week.

“The structurally low profitability of the euro area banking sector remains a concern for financial stability and for monetary policy,” Guindos said. “The causes of low profitability are for the most part structural and hence require structural solutions. Successful implementation of long-run profitable business plans is essential.”

The comments echo those made by President Mario Draghi, who last month said that European banks should focus on consolidation, cost-cutting and improving technology to boost profitability rather than complaining about the effects of negative interest rates. Guindos said that “the low interest rate environment is with us for the foreseeable future.”

When asked about Brexit after the speech, Guindos said he was optimistic that the U.K. and the European Union would reach a deal before the Oct. 31 deadline.

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