The macroeconomic climate experienced by European banks throughout the 1970s and 1980s has been of a much more volatile nature than that of the 1950s and 1960s. The unpredictability of macroeconomic variables such as interest rates, exchange rates, budget deficits and surpluses has resulted in a much more uncertain environment. The degree of uncertainty and the inability of the banks to plan for cyclical downturns was reflected in the performance of European banks during the recessionary period of the late 1980s and early 1990s.

After interest rates increased in late 1988 and early 1989, Europe went into recession, and the cost to the banking sector became apparent through extensive bad debts. It has been argued that the main impact of this recessionary period on the banking system was that European banking systems became driven more by profitability than by size. By early 1994, European banks were again operating in favourable conditions with low interest and inflation rates. Banking has become characterized by a de-emphasis on lending, and banks have competed aggressively to retain core deposits. The overall impact has been that fee and commission income have become an increasingly important part of bank earnings. The retail banking market has also become increasingly driven by savings products, with mortgages the principal source of loan growth. An increasing proportion of income has been, and will continue to be, obtained from trading activities.

The European financial services sector as a whole has become more efficient as a result of investment in technology, but this has also generated substantial job losses. Bank management has become more focused on cost and profitability rather than purely on market share and capital standards have improved, resulting from the changed (and changing) nature of business. In addition the role of the state in the banking sector has declined and is expected to continue to diminish, particularly in terms of state ownership of banks.

In addition to the above trends, it also important to note that demarcation lines between markets, intermediaries and lines of business have also been rapidly eroding. The blurring of distinction between bank credit and securities, domestic and international paper, and cash and derivatives products has helped to foster the integration of cross-border investment. The implication of the EU's Second Banking Directive in domestic banking legislation has also established universal banking practice for credit institutions within EU countries, rendering the old distinctions between different types of credit institutions obsolete.