Banking should be robust to tighter finance conditions

Significance

A global slowdown will depress banks' income, while also compromising credit quality and demanding increased provision against losses. The flattening of the yield curve is also an issue for banks that borrow short and lend long.

Impacts

• Financial system ‘greening’ will continue given the importance of environmental, social and governance criteria; Europe will lead on this.
• Higher interest rates should aid banks’ profitability, but flatter yield curves will exert an offsetting influence.
• The IMF warns that rapid growth of fintech, especially digital banks and decentralised finance, poses risks to global financial stability.