The European Banking Federation published on 11 September 2019 Banking in Europe; the 2019 Facts & Figures, its annual update on the banking sector in Europe. The publication shows that the European banking sector, both as measured in terms of staff numbers and branches, continued to contract as the industry continued to improve efficiency while attempting to bolster its profitability.
The Banking in Europe overview shows that banks last year continued to scale back their physical presence across Europe as having a widespread branch network become less important. Clients increasingly interact with banks through digital channels instead of branches.
The total number of credit institutions in the European Union fell by 2.6% in 2018 to 6,088 institutions, down by 2,437, or 29 percent, since the contraction began in 2008. Last year’s decline was smaller than in recent years and was most notable in Germany and Italy. The number of credit institutions increased last year in seven countries, most notably in the United Kingdom.
The total number of bank branches in the EU last year declined to approximately 174,000, down 5.6 percent, or about 10,000 branches, when compared to the end of 2017. Compared to 2008 the total number of bank branches has declined 27%, or by almost 65,000, reflecting the accelerating uptake of online and mobile banking services in recent years. In 2018 more than half of all people in the EU, 54 percent, used Internet banking, compared to 51% in 2017 and 29 percent in 2008.
The number of people working for credit institutions in the EU fell to the lowest level since the ECB started measuring this in 1997 and stood at approximately 2.67 million people at the end of 2018, compared to 2.74 million a year earlier. This compares to 3.26 million in 2008. About two-thirds of all bank staff in the EU is employed by a bank headquartered in one of the five largest EU member states.
Deposits from householders and businesses continue to increase
The total deposits from businesses and households grew by 4 percent to €13 trillion, with €9.9 trillion in deposits in the euro area. Deposits from households rose 4.2 percent compared to a year earlier while business (non-financial corporation) deposits increased 3.6 percent.
The value of loans to EU households increased 2.5 percent to €8.3 trillion, led higher by loans to households in the euro area, which grew for a fourth consecutive year. The value of loans to households in the eurozone has risen by some €500 billion since 2014.
Luxembourg’s international banking centre has a long-standing expertise in financial services, ranging from international private banking and wealth management, retail banking, corporate finance to fund services and depositary banking. Luxembourg is leveraging its unique strengths and attributes to position itself as a leader in emerging fields such as innovative financial technologies (‘Fintech’) and sustainable finance.
Growth in Luxembourg was close to 3% in 2018, mostly carried by strong consumer spending. Employment has grown by 3.7% year-on-year in 2018. Employment in the financial sector grew by more than 4.1%.
The banking sector is the main economic engine. In 2018, it has one third of the Gross Domestic Product (GDP), 11% of employment and 21% of fiscal revenues.
Luxembourg features the highest banking internationalisation rate in Europe (94.8%) with more than one third of the 136 banks coming from outside the European Union. These banks are operating an expanded business model on a cross-border basis, using an EU passport for providing financial services across Europe, particularly in private and corporate banking as well as in asset servicing.
Banks in Luxembourg have sufficient own funds to face potential difficulties with a CET1 ratio of 25,1%. With 25,9% solvency ratios remained well above the thresholds and banks show a high level of capitalisation.
Online banking and digital payments boast high utilisation rates with 96% for the 25-34 age range making use of online banking. Also, debit or credit card transactions have accounted for 63% of the total payments in volume in 2018.
Loans increased by 6.7% year-on-year, thanks to the contribution of the retail banking, corporate banking and private banking sectors. At the same time, the evolution of deposits is stable. On a general basis, deposits are still higher than loans, ensuring a robust stability and a high liquidity in all credit institutions.
Over the last years, Luxembourg’s stable and diversified financial ecosystem has facilitated the establishment of new banks incorporating their European hubs in Luxembourg, including the seven largest Chinese banks – Bank of Communications, the China Merchants Bank, the Agricultural Bank of China, the Bank of China, the Industrial and Commercial Bank of China, the China Construction Bank and the China Everbright Bank. Chinese banks led the sector in terms of year-on-year balance sheet growth in 2018.
Luxembourg’s commitment to sustainable finance has created an ideal environment for mobilising international capital for green projects. Luxembourg is a frontrunner in pushing for the most advanced solutions, testing and implementing new approaches to ensure that sustainable finance products are widely available.
In October 2018, Luxembourg’s Government, together with the United Nations Environment Programme Finance Initiative (UNEP FI), officially launched the Luxembourg sustainable finance roadmap.
According to the first sustainable finance survey conducted in 2017 by the Luxembourg Bankers’ Association among the country’s foremost financial institutions:
- 85% of financial institutions already incorporate social and environmental elements in their vision and strategy and are signatories of global or local sustainability initiatives;
- More than 65% of respondent banks offer green finance products to their clients;
- The main drivers behind the adoption of sustainable finance practices are deemed to be brand recognition (76%), stakeholder (64%) and shareholder requirements (64%);
- Banks are experiencing a growing demand from clients for green products (28%)
Building on its strong and longstanding track record characterised by stability and international outreach, Luxembourg is expanding its leadership in areas such as e-commerce, e-payment and fintech which are currently reshaping the global financial sector.
Banking in Europe; the 2019 EBF Facts & Figures is a multi-faceted digital resource with key data about banking in Europe. It also includes data on the European economy, the performance and structure of the banking sector and the digital transformation of banks. The data is based on publicly available information from the European Central Bank, the European Commission, Eurostat, the European Banking Authority and the EBF and its the members.
The publication is available online via the EBF website.
In addition to the public data, Banking in Europe 2019 includes comprehensive national bank sector data provided through all 32 national banking associations that are members of the EBF.
The 2019 edition again includes descriptions of national banking sectors by EBF associate members, including banking associations in Albania, Andorra, Armenia, Azerbaijan, Bosnia and Herzegovina, North Macedonia, Monaco, Moldova, Montenegro, Serbia and Turkey. All this national data can be accessed via an interactive map of Europe.
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