Europe's supervisory authorities (the European Securities and Markets Authority, the European Insurance and Occupational Pensions Authority and the European Banking Authority) have published a joint report on the risks in the EU financial system, which warns that some banks must change their business models to make themselves more sustainably profitable in an environment of low interest rates and tougher regulation.

The report did not give examples of successful and unsuccessful business models, however it does promote more innovative approaches to stimulate the economy.   

The report observed that it is harder for supervisors to calculate how much capital banks should hold due to the size of fines enforced against lenders for misconduct including price-fixing capital markets and interest rate benchmarks. Adequate inclusion of misconduct costs in future EU stress tests of the sector were recommended, such as taking extra measures when needed and forcing banks to hold more capital to cover potential fallout from big fines.

The report can be read in full here.