International Monetary Fund: large fraction of the banking sectors may fail to generate profits in 2025
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International Monetary Fund: large fraction of the banking sectors may fail to generate profits in 2025
IMF stated in the latest "Global Financial Stability Report" that "simulation exercise conducted for a group of nine advanced economies indicates that a large fraction of their banking sectors, by assets, may fail to generate profits above their cost of equity in 2025."
"Over the medium term, banks may seek to recoup lost profits by taking excessive risks. If so, vulnerabilities could build in the banking system, sowing the seeds of future problems," the IMF said.
Besides, the report said that "uderlying profitability pressures are likely to persist over the medium- and longer-term even once the global economy begins to recover from the current shock."
The coronavirus (COVID-19) crisis could further expose the vulnerabilities highlighted in the Chapter 2 (Risky Credit Markets) of Global Financial Stability Report. The IMF stated that policymakers should act decisively to contain the economic fallout of COVID-19 to support the flow of credit to firms.
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