lemonde.fr
European Online Banks: Funding Model Raises Financial Stability Concerns
Sixty online-only banks in Europe, holding 3.9% of banking assets in 2024, primarily rely on small individual deposits (80%), raising concerns about financial stability due to their limited diversification and vulnerability to bank runs, according to a May 2025 ECB report.
- How does the funding structure and client base of online-only banks in Europe contribute to their vulnerability?
- These banks' reliance on small, volatile individual deposits (80% of funding) and lack of physical presence exposes them to higher risk, despite 90% deposit coverage by national guarantee schemes. This is a key finding from the European Central Bank's (ECB) May 2025 financial stability report.
- What is the primary risk posed by Europe's 60 online-only banks to financial stability, and what specific data supports this?
- In Europe, 60 online-only banks exist, holding only 3.9% of banking assets in 2024, up from 3.1% in 2019. Their funding comes mainly from small individual deposits (80%), creating volatility and cross-border deposit shifts due to a lack of physical branches.
- What are the long-term implications of the observed funding model and geographical limitations of these online-only banks for the European financial system?
- The ECB highlights the risk these banks pose to financial stability due to their undiversified client base and dependence on online channels, increasing vulnerability to bank runs. The average deposit size is smaller than in traditional banks, indicating limited use as primary accounts.
Cognitive Concepts
Framing Bias
The headline (if there was one) and introductory paragraph likely framed the issue negatively, focusing on risks and weaknesses. The use of phrases like 'risk they represent', 'weakness', and 'vulnerability' in the body reinforces this negative framing. The positive aspects of online banking are mentioned briefly but receive less emphasis than the negatives.
Language Bias
Words like 'weakness', 'vulnerability', 'volatility', and 'risk' create a negative tone. More neutral alternatives might be 'challenges', 'susceptibility', 'variability', and 'potential concern'. The repeated emphasis on the risks and lack of diversification reinforces this negative framing.
Bias by Omission
The analysis focuses heavily on the risks of online banks, potentially omitting the benefits or advantages they offer compared to traditional banks. It mentions better returns, but doesn't delve into user experience, accessibility, or other potential positives. The perspective of online bank customers is largely absent, relying instead on the BCE's assessment.
False Dichotomy
The analysis presents a somewhat false dichotomy by framing online banks as solely reliant on small deposits and vulnerable to volatility, while ignoring the potential for diversification or adaptation in the future. The piece implies that interest rates are the only reason to choose an online bank, overlooking other factors.
Sustainable Development Goals
The article highlights that online banks primarily rely on small deposits from individuals, lacking diversification in their clientele. This concentration of deposits from individuals, especially those with smaller amounts, could potentially exacerbate existing inequalities if these banks were to fail, disproportionately impacting individuals with fewer financial resources. The volatility of these deposits and the potential for cross-border issues further complicate the situation, potentially leading to uneven access to financial services and increased financial instability for certain groups.