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European bankers fear imminent recession

03 April 2013

European bankers fear imminent recession

Risk managers from Europe’s biggest banks believe a recession is imminent in Spain and Portugal, while many in the UK and Ireland think local downturns are looming, according to a study. More than 100 risk managers from 31 European countries, surveyed jointly by analytics specialist FICO and the European Financial Marketing Association (Efma), painted a bleak picture for the Eurozone, with 79 per cent forecasting a Europe-wide recession in 2012.

FICO’s fourth European Credit Risk Survey grasps the bankers’ views on trends in consumer credit that will unfold throughout 2012; and shows stark prospects in mainland Europe with the UK and Ireland also facing severe challenges.

A telling 100 per cent of respondents from Spain and Portugal agreed that a recession was imminent in their respective countries, while more than half of the risk managers from the UK and Ireland forecasted a local recession in their areas. Patrick Desmares, secretary general of Efma, said: “With the Eurozone sovereign debt crisis still playing out, bankers have every reason to be pessimistic.

“Until the political situation at the core of Europe is resolved, or the global economy improves to the point where it lifts European markets, confidence among bankers and consumers will be at a low ebb.”

More than half of all the respondents predicted that mortgage delinquencies will increase across Europe, while nearly two thirds said the housing market would not end the year in a stronger position.

Mike Gordon, FICO vice president and managing director for Europe, the Middle East and Africa, said: “We don’t see housing markets improving until job markets improve, and right now the forecast looks rocky at best.

“These forecasts echo those in our recent survey of US credit risk professionals, who said housing prices would not return to pre-recession levels until at least 2020. In countries like the US and the UK, the housing market also won’t rebound until the backlog of distressed properties is cleared out.”

In the UK and Ireland, 69 per cent of respondents said the government’s austerity measures will reduce banks’ profitability and more than half, 55 per cent, added that banks will slash operations in central and eastern Europe.

Despite an overwhelming majority of UK and Irish risk managers (91 per cent) forecasting a reduction in availability of credit as a result of banking regulations, only 36 per cent said that either small businesses or consumers would find it harder to obtain credit.

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