Euro zone banks need a fundamental overhaul of their business models, the International Monetary Fund warned yesterday.

In its twice-yearly Global Financial Stability Report, the fund said banks in the single currency area needed to increase the cost of some of their lending and might have to retrench further to be in the position to support business investment.

The IMF’s warning came as it fretted that low interest rates in the euro zone were not sufficient to support risk-taking that was beneficial to economic growth, but might be encouraging the build-up of financial vulnerabilities. – Copyright The Financial Times Ltd 2014