Low rates weigh greatly on smaller German financial institutions

Low rates weigh greatly on smaller German financial institutions

Extremely low official interest rates keep putting pressure on Germany's smaller financial instructions, as a couple of watchdogs reported on Wednesday.

The Bundesbank and BaFin, Germany's bank regulators, polled about 1,500 small as well as medium-sized banks, which account for up to 88% of institutions and also 41% of total assets.

As the findings revealed, financial institutions actually expect pretax revenue to go down by an overall 9% for the next five years.

It corresponds to a 16% sag in the banks' overall return on capital. Well, while abrupt, it’s still is less than the 25% sag in return on capital actually anticipated in last poll conducted two years ago.

Some financial experts state that the phase of stagnation provoked by low interest rates appears to be far from over.

Additionally, the regulators appreciated the fact that German banks were looking for alternative sources of income just to withstand low rates.

 

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