More than half the banks in the world will not survive recession McKenzie

New York: The global consulting firm McKenzie issued a warning that nearly 60% of the banks in the world have failed to get returns on their investments, and these banks will not be able to take the hit of the recession. Against the background of the indications of recession received from around the world, this warning issued by McKenzie has created a sensation.

Earlier, the financial status of the Banks had become a significant factor during the global recession in 2008-09. Nearly 450 banks had closed during or within the next few years of the downturn in the United States alone. The banking sector in the European countries also was severely hit by the debt crisis, following the recession. The enormous non-performing loans, given by these banks, became the cause of their failure.

After that, reforms were introduced in the banking sector in the United States, Europe and around the world. These included adequate capital requirement and sufficient fund provisions by the banks. But the McKenzie report shows that the concerned banks did not correctly implement these reforms. The McKenzie report blames that performance of nearly 35% of the banks is inferior.

The report recommends that the business models of many of these banks are flawed and immediate corrective measure are warranted. The McKenzie report points out that these banks will have no other option, but to merge into other banks in order to survive the recession. The report also states that if the downturn lasts for a more extended period, it will be fatal for nearly 60% of the banks.

Since the last few months, employee layoffs and other measures are being taken by many leading banks in the world. The European banking sector is in the lead, and the leading banks have majorly reduced branches and employees in the Asian and American continents. The reasons forwarded for these, include US-China trade war and uncertainty regarding Brexit.

In their warnings about the Chinese economy, institutions like the International Monetary Fund have said that the enormous debt burden carried by the Chinese banks could cause the failure of the economy. Against this background, this McKenzie report points to the new crisis waiting in the wings for the banking sector.