The report focuses on four main aspects which could become a threat to the economy and the financial system in the following two years:
-Increase of the inability to absorb international tribulations
-Weak profits for banks and insurance companies within a financial environment of low growth and instability
-The danger of an increase in the non-viability of public and private debt while financial growth remains slow
-Explosive expansion of the “shadow” banking system
Besides those dangers, the ECB acknowledges that the European banking system has achieved progress in a number of sectors such as the decrease of its exposure to rising markets, the improvement of profitability and the increase of its reliability.
On the other hand, the banking system still has to face some major challenges that remain; a weak macroeconomic environment, low profitability, and the large number of “red” loans are factors that hold back the growth of the banking sector.
The ECB concludes th
at, at the same time, the private and public debt remains very high in many Eurozone countries. This fact hinders the ability of the banks to distribute loans as well as their actual funds.