EBF Facts & Figures 2017

Published 24.07.2017

After years of moderate but steady economic growth the euro area economy will continue its recovery. The uninterrupted recovery which started in the second quarter of 2013 helped the euro area bloc to grow at 1.6% and at a faster pace in 2016 than the economic expansion in the United States, for first the time since the financial crisis. This was also a higher rate than international partners such as Canada (1.4%) and Japan (1.0%) and parallel to the UK (1.8%). The euro area however has a lower expected growth rate for 2017 and 2018 than the EU 28 and the US. The slowdown is driven primarily by political uncertainty in Europe and the US and geopolitical tensions which are presently surrounding the world economy. A realisation of slowing Chinese growth could further hamper growth.

Having increased from 2015 to 2016, private and public consumption growth rates are expected to decrease in 2017 to 1.4% (1.9% in 2016) and 1.2% (2.0% in 2016), respectively. Private consumption nonetheless remains the main driver of growth in the euro area. Aggregate demand will continue to be stimulated by monetary policy. With the global economy continuing to recover, exports are expected to increase by 3.7% compared with 2.7% in 2016, with imports experiencing a marginal increase as well.

Further positive changes in the euro area are expected to materialise in 2017 and 2018. Unemployment is expected to decrease in 2017 from 10.0% to 9.5%, falling to 9.1% in 2018. This remains significantly higher than the US (4.7%) and Germany (3.9%), but represents a positive trend. Wage growth is expected to be 1.6% in 2017, doubling from 2016’s 0.8%, with a further marginal increase expected in 2018.

Rising inflation rates propelled mostly by the increase in the price of Brent oil are expected to bring inflation to 1.6% in 2017, the closest rate to the ECB’s target in over four years, alleviating any remaining concerns about deflation. Core inflation, however, is expected to be only 1.1% in 2017.

These conditions are complemented by a renewed potential for labour and financial market reforms in Europe. The election of President Macron in France is expected to inject new energy into French and German cooperation, especially after Germany’s federal election in September, which could help induce such reforms. Further, the effects of President Junker’s Investment Plan for Europe may also begin to materialise in 2017 and 2018, assisting growth.

With key variables moving in a positive direction, including a better global outlook, the euro area is expected to experience continued growth in 2017 and beyond. However, such conditions are underlined by relatively high and unequal rates of unemployment, especially among youth and minorities. Employment in industry and construction sectors also remain far below their pre-crisis levels. Moreover, while political uncertainty in Europe has declined after the French and Dutch general elections, future elections in Italy, along with continued geopolitical risk in Ukraine, Russia, Turkey, and the Middle East, threaten to bring about new shocks to the European economy. Uncertainty from the United States, not least its positions on trade and international monetary policy, and the level of complexity of the Brexit negotiations and the relative short time in which to reach a final deal could also lead to changes in these expectations.

The Chief Economists’ Group of the European Banking Federation in its Spring 2017 Outlook of the Euro Area Economies in 2017 – 2018 reflects that the current economic outlook remains surrounded by a number of both upside and downside risks with the risks to the growth outlook fairly balanced.

Number of banks


The downward trend in the number of EU-28 credit institutions, which started in 2009, continued in 2016 falling to 6,596, a decline of 6% compared to the previous year and a reduction of 1,929 in total since contraction started. Most of the consolidation has occurred within credit institutions legally incorporated into the reporting country, where the stock has fallen by 26% since 2008. This trend includes factors such as mergers in the banking sector with a view to enhancing profitability and greater economies of scale.

The countries having experienced the largest contraction in absolute terms in 2016 were the Netherlands (-113 units), Germany (-72 units), and Austria (-63 units), according to the ECB. Only Slovakia (+2 units) increased the number of credit institutions while Sweden remained unchanged. The number of credit institutions in the EFTA countries fell from 423 to 418 in 2016.

Bank staff

By end-2016, EU-28 banks employed about 2.8 million people, about 50,000 fewer than in 2015 and the lowest level since the ECB’s data series began in 1997. The five largest EU economies continue to be the five countries with the largest number of employees in the banking sector employing some 68% of the total EU-28 staff employed. Including EFTA countries, the number of staff employed in the banking sector was more than 2.95 million.

Also reflecting a contraction in the banking sector, the average number of inhabitants per bank staff in the EU Member States rose from 179 in 2014 to 183 in 2016.


Competitiveness of European Banks and Financial Technology

The data has been compiled from publicly available information released by the European Central Bank, European Commission, Eurostat, the European Banking Authority, International Monetary Fund, national competent authorities and members of the European Banking Federation. Unless otherwise noted, all graphs and tables have been produced to illustrate the figures mentioned in the relevant chapters.

The European banking sector continued its positive recovery in 2016, with the recapitalisation of EU banks completed and financial fundamentals improving.

However, the tightening grip of new regulations, along with the disbursement of new technologies, presents banks with new challenges and opportunities.

Regulations have led to increased capital and liquidity needs for banks, placing pressure on profitability with the cost of equity (COE) exceeding the ROE since 2008. This ROE gap has created an unsustainable environment for EU banks, making it difficult for these banks to be profitable.

This development is compounded by a low price-to-book ratio, and a rise in operational costs resulting from increased compliance and reporting.

According to a confidential survey to senior executives of European banks the following challenges constitute the most significant ones facing EU banks:

  • Capital requirements
  • Reporting requirements
  • Liquidity requirements

Market conditions have presented challenges for banks across the world, but a gap has begun to emerge between the bank indices of US and EU banks, with significantly fewer European banks finding themselves among the top 30 largest banks worldwide, compared to before the crisis.

Improving economic conditions in Europe have contributed to, and will continue to aid, the recovery of the European banking sector. But populist sentiment in Europe has made it difficult for policymakers to implement needed fiscal reforms, not least in the euro area.

Despite these challenges, the EU remains a favourable environment for banks.  According to EBF members, the presence of the Single Market, the euro, and the uniform regulatory framework are all beneficial aspects of operating in the EU.

EBF members also agree that digitalisation is one of the main methods for banks to increase their competitiveness, with 90% of banks stating that digitalisation is a priority for them. The growth of FinTech and digital payment solutions provide particularly interesting opportunities.

Digitalisation also comes with a downside, especially with the displacement of IT and administrative services within banks growing. Despite these drawbacks, banks are usually at the forefront of technological development, and should be encouraged to continue this innovation moving forward.

Other challenges to operating in the EU, beyond those already mentioned, include the prevalence of negative interest rates and the incomplete integration of the euro area.

Digital transformation

The digital transformation of European banks continues with banks projected to spend in excess of €62 billion on IT in 2017.

New technologies in a variety of fields provide banks with the opportunity to increase their revenue and reduce cost, especially important in an increasingly regulated environment. According to McKinsey, upwards of 30% of costs can be eliminated by digitalisation.

By 2018, banks in Western Europe are estimated to receive over half of new revenue from digital sales.

These developments are also beginning to appear in consumer’s expectations and behaviour. According to the Commission, in 2016, 45% of consumers in the EU-28 had purchased a good online within the past three months, an 88% increase from 2008.

Digital banking services remain a strategic priority for European banks, with 61% of European banking executives viewing investments in technology as very important.

The internet, cloud-based solutions, and the mobile phone are the primary drivers of these innovations. But the rise of machine learning, artificial intelligence, and the internet of things (IoT) provide interesting opportunities for future developments.

Challenges do remain. Differing tax systems within the EU, as well as significant discrepancies between countries in their adoption of these technologies, provide room for future improvement.

Banks are also finding solutions to speed up their payments’ processing systems. Driven by EU regulatory frameworks (PSD2), European banks are leading globally in terms of the implementation of real-time payments.

Policy changes could also help foster growth. Notably, the creation of a Digital Single Market could create over €415 billion in additional growth and 3.8 million new jobs in the EU.

Banks embracing financial technology

Financial technology, also known as FinTech, provides unique opportunities for both banks and consumers. For instance, peer-to-peer payment apps, which are being widely adopted by banks, make it easier for consumers to send money to each other, while new risk management services which utilise data provide banks with an advantage over other firms in this changing environment.

Other emerging technologies are also entering the financial landscape and show promising signs of useful application. European banks are strategically investing in several FinTech solutions and firms including wealth management, lending, payments, regulatory technology, and distributed ledger technology, with 92% of banks investing in blockchain technology and 62% of banks investing in financial services software and regulatory technology.

Banks are also finding solutions to speed up their payments’ processing systems. Driven by EU regulatory frameworks (PSD2), European banks are leading globally in terms of the implementation of real-time payments.


European Banking Sector Facts and Figures 2017

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