Banks warns of ongoing GFC malaise
The global economy has shown encouraging signs over the past year, but its malaise persists, says the Bank of International Settlements.
The malaise, it says in its 84th annual report released overnight, is the “legacy of the Great Financial Crisis and the forces that led up to it remain unresolved”.
The Switzerland-based Bank for International Settlements acts as a bank for central banks.
The bank said it was time for a new approach by banks and government to move away from debt-funded stimulus.
“It also needs to address the longer-term build-up and run-off of macroeconomic risks that characterise the financial cycle and to shift away from debt as the main engine of growth.
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“Restoring sustainable growth will require targeted policies in all major economies, whether or not they were hit by the crisis.
“Countries that were most affected need to complete the process of repairing balance sheets and implementing structural reforms.”
The bank said that despite a pick up in growth, the global economy has not shaken off its dependence on monetary stimulus.
“Monetary policy is still struggling to normalise after so many years of extraordinary accommodation.
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“Despite the euphoria in financial markets, investment remains weak.
“Instead of adding to productive capacity, large firms prefer to buy back shares or engage in mergers and acquisitions. And despite lacklustre long-term growth prospects, debt continues to rise.”
In its assessment of the world’s banks, Australia’s big four fared well.
The report said pre-tax profits as a percentage of total profits for the Australia’s biggest banks came in at 1.28 per cent last year, ahead of US banks (1.24 per cent), leading banks in Japan (0.68 per cent), Germany (0.10 per cent), France (0.32 per cent) and the UK (0.23 per cent).
The only banks bettering Australia’s big four were from the large emerging market economies in Brazil, India, Russia and China.
“Outside the euro area, banks’ pre-tax profits improved last year but remained generally below pre-crisis averages,” the report said.
“Interest rate margins did not contribute as much as in previous years. They remained mostly flat globally, and in some cases even declined.”
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