Report: European banks shrank 12 pct post-crisis

Associated Press

FRANKFURT, Germany (AP) — The European Central Bank says that the banking system in the 17 countries that use the euro has shrunk since the global financial crisis hit more than five years ago.

The ECB says in a report Monday that there are now fewer banks in the business of lending and that loans make up a smaller part of their business. The size of the sector, by assets, fell 12 percent between 2008 and 2012.

Meanwhile, banks have loaded up on government bonds.

The report underlines the troubles facing the banks as the ECB begins a yearlong check of their finances. Banks whose finances are too strained to lend are holding back growth. Government bond holdings tightened banks' links to government finances — which magnified Europe's troubles with government debt.