Risky behaviour by big banks, especially those in Europe, was again threatening the global economy, a global organization of central banks has warned.
The Bank for International Settlements (BIS) also warned in its annual report that government, bank and household debt was dragging down the world economy, the Associated Press reported.
More needed to be done to make the banking system safer, "with advanced economies struggling with debt and emerging economies growing strongly but facing risks of their own version of boom and bust."
"The world is now five years on from the outbreak of the financial crisis, yet the global economy is still unbalanced and seemingly becoming more so as interacting weaknesses continue to amplify each other," the BIS report said.
"The goals of balanced growth, balanced economic policies and a safe financial system still elude us."
Banks would need to adopt more aggressive cost management strategies as the new regulatory environment will threaten their profitability, the BIS report found.
The report also ranked banking performance across 13 countries, finding Australia's big four banks to be the most profitable in the developed world for the second year in a row, according to Fairfax media.
Australia's so-called "big four" — Commonwealth Bank, Westpac, ANZ and NAB — posted pre-tax profits equal to 1.19 per cent of their assets in 2011.
Canada, which also dodged the worst of the global financial crisis, came in a distant second, with profits equal to around 1 percent, ABC News cited the BIS report as saying, while the US ranked third with profits around 0.9 percent.
Italy's banks fared worst with losses equal to 1.2 percent of total assets.
The Australian banks had benefited from higher interest margins and lower operating costs than most of their peers, the report found.
The banks have recently come under fire for failing to pass on official interest rate cuts, arguing that they face higher costs from slower credit growth and tougher capital standards, The Age wrote.
A Basel-based organization of central banks, BIS is also known as the central bankers' bank.
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