This paper discusses the competing forces that are reshaping the European banking industry and the medium-term consequences for profitability and competition within the sector. The paper highlights that banks are rethinking their business model to address four challenges to emerge in the last...

We verify the effects of sovereign rating revisions on the activity of European banks, in terms of their regulatory capital ratio, profitability, liquidity, and lending supply. First, we find that a sovereign downgrade has a significant impact, primarily on capital ratios and lending supply. In...