Vítor Constâncio, the Vice President of the European Central Bank, reflected on the challenges facing the banking sector at a conference organized by the Master’s Degree Program in Banking and Financial Regulation in the School of Economics and Business Administration at the University of Navarra.

At the event “European Banking Industry: What’s Next?” Constâncio said that “deep reflection was necessary to correct some market flaws with a bit of state assistance and thus significantly stabilize the banking sector,” which has been weakened by Brexit. He also stressed that Europe needs a “comprehensive strategy” for coordination in order to reduce the high level of nonperforming loans.

“Bank profitability has recovered somewhat recently, but still remains at very low levels,” lamented the ECB Vice President while referring to one of the challenges facing European banks.

Constâncio argued that the key for banks to revive their prospects and contribute to credit intermediation is to adapt to the new challenges, which he said included competition from the emerging FinTech businesses that create financial applications, the climate generated by low interest rates and future regulatory measures.

Despite the “siege” that banking is under and the “consolidation difficulties in the industry,” Constâncio said that banks would not disappear in the near future. Their strategy must involve a “change in business models.” However, Constâncio said that there was not just one way to accomplish this and that blanket measures would not work for all because location and the operating environment are also key factors.

Constâncio said that the “ingenuity, hard work and competence of each bank” were the best ingredients to tackle the changes: “Only a sound, profitable banking sector can serve the economy and finance the economic growth we need,” he said.

Also participating in the conference at the Madrid head offices of Cuatrecasas, Gonçalves Pereira were José Manuel González-Páramo, Executive Board Member of BBVA, José Sevilla, CEO of Bankia, and Ignacio Ferrero, the Dean of the School of Economics and Business Administration.