Implications of the Financial Crisis on EU Retail Banking (Pénzügyi műhelytanulmányok 6)

The paper examines the possible implications of the ongoing crisis (2007-2009) on EU retail banking business. After an explanation of the origins of the crisis, the paper compares the ongoing crisis with the Great Depression from the macro and microeconomic side by using stylized facts. Although the depth of the crisis was similar to the Great Depression, the quick and determined joint actions of the fiscal and monetary authorities in the world seem to prevent the same outcomes. From the microeconomic point of view, the crisis is very similar to the Great Depression, although this banking panic was “wholesale” in spite of the retail banking panic in the 30’s. As a consequence of the crisis, the regulatory burden will increase, the paper evaluate the current regulatory suggestions and their business effects: increasing capital buffers, costs and lowering rates of returns. The short term strategic and operative implications show some kind of return to the core-banking business. The medium term will impose some challenges to large international banks – these challenges will be organizational and activity based as well (funding). In the long run, big universal banks with good deposit gathering capabilities and efficient operations could be the winners of this period, partially by moving East for the higher returns