The future of the European banking sector – What comes after Covid-19?

The coronavirus crisis has increased the pressure on banks to change. Our study supports you in analysing the implications and deriving strategies.

The coronavirus crisis has increased the pressure on banks to change

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The coronavirus crisis has intensified the already existing challenges in the European banking sector. Europe's oversaturated banking market was grappling with all sorts of challenges already prior to the pandemic: high costs, low profit margins, increasing regulation and mounting competition with global competitors, and in some cases from other sectors  - and a rapidly transforming technology environment combined with weakening customer relations. 

The megatrends continue

In our study entitled "The future of the European banking sector" we describe how issues for Europe's banking sector have changed in the crisis and the four scenarios banks should prepare for in the coming years.

The megatrends from before the pandemic (regulation, sustainability, digitalisation and the associated growing threat of cyber-attacks) have gained in importance during the crisis. These will shape the future of European banks.

Geopolitical effects

Furthermore, there was already a trend towards geopolitical fragmentation before the coronavirus crisis, which has intensified during the pandemic. In this regard, the coronavirus represents a new challenge for the European Union's cohesion. 

This brings us to two core questions. First: How will geopolitical fragmentation develop  - will this intensify or can we expect rule-based global competition? Second: How will Europe act in the geopolitical arena in the future  - as one unit with one voice or as a group of loosely connected countries?

Four scenarios for the coming years

Based on these questions, we can derive four scenarios regarding the level of geopolitical fragmentation and European unity. These scenarios influence the strategic options of banks, which must ask themselves various questions, such as: What will competition in Europe look like in the future? How will the banking union develop? In which markets can European banks be active and with which services?

Our study entitled "The future of the European banking sector" describes the implications for European banks and identifies strategic directions.