The favorable conditions which contributed to the increase in profitability over the last years are not going to continue in the future, Bank of Greece Governor (BoG) Yannis Stournaras warned bank managements.
“Commercial banks need to prepare for a more unfavorable banking and macroeconomic environment due to the tightening of monetary policy,” he said, speaking at the EUROFI 2023 High-Level Seminar.
He explained how the ECB’s rate hikes so far have positively affected the profitability of commercial banks through an increase in the net interest margin (because loan rates are readjusted immediately while deposit rates need more time). However, this, he said, is not expected to continue, due to the gradual increase in deposit rates, the increase in funding costs in the money markets and the decrease in demand for loans.
Referring to fiscal developments, he argued that it is imperative that the fiscal stance remains restrictive and that the new fiscal rules apply in the eurozone from the beginning of 2024.