Britain’s beleaguered bankers no doubt hailed the end of the most recent wave of banker bashing after a review into banking culture was dropped, however the sector is now under the cosh from market bashing and shows no signs of ending.

This could have grave ramifications for investors.

European bank shares have been plunging since the start of the year and shareholders are understandably spooked. The drop in bank share prices comes amid a perfect economic storm – and banks are in the eye of that storm.

The low interest rate environment, deep concerns over exposure to the energy sector and slowing global growth are the most dangerous aspects of the storm engulfing the industry.

Low interest rates, in particular, are exerting severe pressure on banks’ margins and threaten to erode the profitability of commercial lenders. Some central banks — including those in Japan, Switzerland, Sweden and Denmark — now have negative interest rates. And the ECB’s deposit rate currently stands at -0.3%, with a further cut in March a real possibility.

Observers have warned that central banks are playing with fire and that negative interest rates will cause a prolonged contraction in lending, hurting banks, consumers and the wider economy.

In the UK, meanwhile, the prospect of an interest rate rise in 2016 has diminished to the point that some think it more likely the central bank will cut rates. And it now seems less likely that the Fed will implement four rate rises this year.

Shareholders are also fretting over European banks’ exposure to the energy sector amid the ongoing commodity rout. The price of oil recently plunged to 12-year lows and this means banks with large exposures to oil and gas companies face the prospect of heavy loan losses as bets made in the good times come back to bite.

A recent note from Bank of America analysts underlines the scale of the problem. In what would have made for grim reading for shareholders, the analysts said European banks face potential loan losses from energy firms amounting to 6% of pre-tax profits over three years.

To make matters worse, the oil factor itself creates a viscous circle whereby the plunging price of black gold puts downward pressure on inflation, further prompting central banks to cut interest rates and thereby putting yet more pressure on bank margins.

When slowing economic growth and the ever-present risk of cyber attacks are thrown into the mix, investors are understandably concerned about the health of the banking sector — and the health of their investments!

While shareholders watch on tentatively as bank stock prices take a battering, bondholders are also feeling the jitters. New post-crisis global regulations aimed at preventing taxpayers from forking out large sums for bank bailouts mean that bondholders are now on the hook should banks run into trouble.

Not only do bondholders face the risk of having to absorb losses through “bail-in” mechanisms, but investors in CoCos — contingent convertible bonds — risk seeing their debt converted into equity if banks’ capital cushions sink too low.  And this would obviously spell bad news for shareholders too, who would see a dilution in share value. These fears surfaced earlier in February when holders of Deutsche Bank CoCos fretted that the lender would not be able to keep up coupon payments, forcing the German lender to issue a reassuring statement in what was a rare move.

And bond investors have scrambled to buy insurance against falling bond prices, with the cost of credit default swaps climbing as result.

Put simply, European bank investors are exposed to a new and dangerous array of risks that will have important consequence for retail shareholders, institutional investors such as pension funds and asset managers.

Disappointing Q4 results and profit warnings from the likes of Société Générale and Deutsche Bank have further fanned the flames of investor discontent.

Amid this gloom, European banks saw their share prices take a tumble in February. Falling bank stocks helped push the FTSE 100 to a three-and-a-half year low earlier in the month. The turmoil engulfing the European banking sector has even prompted observers to draw parallels to the Lehman crisis.

But this alarmist comparison overstates the danger and the sell-off in bank shares was something of an overreaction borne out of fear.  Nevertheless, markets can trade more on perception and emotion than reality. And banks are often seen as a bellwether for the wider health of the economy and can therefore bear the brunt of investor disquiet during times of heightened fear.

Such fears were fanned recently when JPMorgan analysts cut their earnings estimate for global investment banks in 2016 by 20% on the back of a slowdown in deals and a challenging macro climate.

Given the industry’s ill health, all eyes will be on UK banks to see if they can provide a much-needed dose of medicine for downtrodden shareholders when they release quarterly results later this month.

But the revenue outlook has undoubtedly worsened for UK banks amid the low interest rate environment. And turbulent market conditions are making it harder for UK banks to raise money on the capital markets. UK challenger bank Metro Bank recently cut the price of its IPO from £500 million to £400 million.

Amid this challenging backdrop, UK banks are looking to cut costs. A survey conducted by PwC found that 70% of bank chiefs in the UK expect to enact cost-cutting measures over the next 12 months. These streamlining efforts may be a prelude to a wider restructuring that could see banks adapt their business models to the new digital landscape by cutting staff, closing branches and adopting robo-advice and other online offerings.  According to reports, Barclays, Santander UK, Royal Bank of Scotland and Lloyds and are all looking to launch robo-advice offerings. Whether or not these offerings will prove a game-changer remains to be seen but the ability of banks to evolve and adapt to the new tech landscape will be key.

Meanwhile, banks could be set to make a return to the advice market as the FCA contemplates reintroducing commission on certain products. A recent CoreData Research survey found that almost half of advisers believe the regulator is mulling a reintroduction of commission to encourage banks to return to the fold and assist mass market investors.

And while the digital and advice landscape is changing, the cultural landscape for the UK banking sector has also undergone a shift. Late last year, the FCA decided to ditch its review into bank culture — a move that was met with accusations the regulator was going soft on the sector and that raised questions over whether the Treasury or Bank of England had exerted undue influence.

Nevertheless, the decision was heralded as a turning point that signalled the end of the era of “banker bashing.” While the epidemic of “banker bashing” may be associated with the myriad of jokes and cartoon-like stereotypes it gave rise to, it is worth remembering just how disliked UK bankers were in the aftermath of the financial crisis. The public backlash against bankers and the evils they were seen to represent almost turned into a mob-like mentality as hard-up Brits vented their anger on the pinstriped brigade for their supposed greed and excess. Bankers were blamed for creating the financial crisis and just about everything else. During the recessionary years between 2008 and 2013, wealthy bankers with their big bonus pots and fast cars served as the perfect scapegoat for all of society’s ills.

Besides “banker bashing,” the banking sector has always managed to court controversy and has rarely been out of the limelight. A series of miss-selling scandals — including LIBOR, forex, and PPI – saw banks slapped with eye-watering fines and bankers sent to jail. The nickname for one infamous banker who racked up particularly large trading losses — the “London Whale” — was a dream for tabloid headline writers.

So now that the “banker bashing” era seems to be relegated to history and banks look to draw a line under a series of damaging scandals (albeit Barclays and HSBC are both back in the news this week over ‘questionable behaviour’), the sector now finds itself confronted with a whole new set of challenges. And the task of keeping downtrodden investors happy amid a torrent of economic headwinds could be the sector’s biggest challenge yet.