Half The World’s Banks Are Too Weak To Survive A Downturn, McKinsey Says

Kevin Mwanza
Written by Kevin Mwanza
World's banks
Most of the world’s banks are too weak to survive an economic downturn and they are not even preparing for it, according to a McKinsey report.

A majority of banks globally are too weak to survive an economic downturn and they are not even preparing for it, according to a survey by consulting firm McKinsey.

In its latest global banking review, management consulting firm McKinsey said that more than half of international banks are yet to regain the same level of profitability they enjoyed before the financial crisis in 2008.

The world’s banks are struggling

Nearly 60 percent of the banks are not generating returns on equity which could be exacerbated if another crisis hits, CNBC cited the 58-page report.

“A prolonged economic slowdown with low or even negative interest rates could wreak further havoc,” the report stated.

The firm said banks risk “becoming footnotes to history” as new entrants change consumer behavior. Most recent attempts by banks to boost efficiency have been “business-as-usual.”

Chira Barua, a London-based McKinsey partner and co-author of the report, said although there are steps banks could take to survive the downturn, time is running out and top management should consider active strategic moves with urgency.

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Banks have been rattled by technological changes, including the increased popularity of digital currencies such as Bitcoin and the widely anticipated Libra by social media giant Facebook.

They have also borne the brunt of record-low interest rates that have made it unprofitable to lend out money.