Monday 18 December 2017

Warning over risky practices at banks

Boris Groendahl

Global banks are still engaging in risky business practices four years after the meltdown of Lehman Brothers helped spark a massive financial crisis.

The Switzerland-based Bank for International Settlements (BIS) warned in its annual report yesterday that banks in developed countries remain highly leveraged, partly because they continue to expect state bailouts.

The BIS said another "worrying sign" was that trading returned as a major revenue source for banks. In some emerging markets, credit and asset price booms have inflated banks' profits in ways "reminiscent of advanced economies" before the crisis, it added.

"These conditions are moving the financial sector towards the same high-risk profile it had before the crisis.''

The BIS provides trustee and counterparty services and is owned by 60 central banks, including Ireland's.

In its report, it said banks would need a "healthy push" by governments to fix balance sheets, abandon risky businesses and serve the public in order to avoid prolonging the crisis.

Lenders still hold overvalued assets and are postponing necessary recapitalisations while relying on official funding, especially in Europe, it said.

The BIS warned that governments need to put more pressure on banks by enacting and enforcing new rules.

Countries face a January 2013 deadline for implementing new capitalisation rules.

Irish Independent

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