Bank in reverse

To what extent is the Belgian banking sector involved in the real economy?

The research paper  A bank in reverse: to what extent is the Belgian banking sector operating in the real economy? shows that most megabanks in our country, especially BNP Paribas and Deutsche Bank, still see no salvation in a traditional banker's role. By the way, they themselves don't pull any punches about this, says researcher Greg Van Elsen: "The banks themselves point out that assets in their so-called trading portfolio are aimed at the rapid buying and selling on financial markets."

In good times, trading produces speculative short-term profits, big bonuses and rising rates. But when the self-serving gambling suddenly goes awry, society pays the price. In that context, it is distressing that today, trading is still the main activity of some banks. Lending to individuals and businesses that stimulate the real economy clearly doesn't prevail.

Furthermore, it is striking that the deposits of a patient saver is good for barely a quarter of the total funding of BNP Paribas and Deutsche Bank. Such banks therefore still to a large extent rely on volatile financial cash flows from other financial institutions to satisfy their speculative appetite. That this practice tends to create dangerous bank-interdependence became painfully true in the recent crisis.

Greg Van Elsen (FairFin)
report (2013, EN)
Bank in reverse128.09 KBDownload