Germany:Financial Sector Assessment Program-Technical Note-The Determinants of Bank Profitability

Financial Sector Assessment Program-Technical Note-The Determinants of Bank Profitability
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Volume/Issue: Volume 2022 Issue 273
Publication date: August 2022
ISBN: 9798400218118
$20.00
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Topics covered in this book

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Banks and Banking , Finance , Economics- Macroeconomics , Money and Monetary Policy , International - Economics , Germany FSAP , asset productivity , commission income , income component , FSAP's finding , net fee , Cooperative banks , Commercial banks , Bank soundness , Loans , Income , Europe , Global

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Summary

German bank profitability is low by international standards. Although German banks rank more favorably in risk-adjusted terms, as low profitability is partially compensated by lower volatility of returns, their profitability ratios remain low. On other measures (such as returns on assets, equity, and risk-weighted assets), German banks, on aggregate, rank among the least profitable in Europe. Several factors affect bank profitability, including a complex tiered industry structure with barriers to entry and an explicit mandate of a large part of the banking system – cooperative and savings banks – to maximize welfare of stakeholders rather than profits.