The International Monetary Fund (IMF) director for Europe argues that the ‘stress’ in the global banking sector is “not over” as interest rates continue to rise, but emphasizes the “solidity” of eurozone banks.
“No [terminou]because the rate hike cycle [de juro] in many countries it is not over yet. What can also be seen is an increase in the financial interest margin, [pelo que] banks benefit from the fact that we can raise interest rates on loans, but interest rates on deposits have not changed that quickly,” Alfred Kammer noted.
In an interview with European news agencies, including the Lusa agency, in Stockholm, the official noted that “this will change over time”, but for now “I wouldn’t say a period of ‘stress’ is over” .
Still, given the recent collapse of US bank Silicon Valley Bank and the Credit Suisse crisis, Alfred Kammer stressed that the starting point for single-currency banks is “different from what was seen in 2008,” the pinnacle of crisis funding, and there is now “a healthy banking system in Europe”.
“It is well-capitalised, highly liquid, well-regulated and well-supervised and so our assessment is that this banking system should be able to handle ‘stress’,” the IMF responsible for Europe estimated.
Still, according to Alfred Kammer, “more needs to be done”, because “when you look at the issue of Silicon Valley Bank of Credit Suisse, it means that regulators need to step up their action and do stress tests and identify vulnerabilities”.
“We believe we need a solid framework for bank resolution” in the Eurozone, he argued.
In March, the global financial sector was strained by the bankruptcy of Silicon Valley Bank in the United States and the purchase by Swiss bank UBS of rival Credit Suisse at a low price, with heavy government guarantees and losses for some bondholders.
This situation did not extend to Eurozone banks, as they benefited from several regulatory improvements since the last financial crisis.
Still, the bankruptcy of state-owned California bank Silicon Valley Bank has raised concerns about the soundness of the eurozone banking sector.
The first European ‘victim’, Credit Suisse, was caught days later by compatriot UBS for a fraction of its market value.
Faced with tensions in the international banking sector, the European Commission proposed last week that deposit guarantee funds should also be used to finance the resolution of small and medium-sized European banks that do not have sufficient capital reserves.
This position from Brussels was part of a legislative proposal on the reform of crisis management in the banking sector and in the context of the deposit guarantee scheme, which also provided for the extension of the protection offered by these funds to deposits of up to 100 thousand euros that were already in place for individuals, to also cover the deposits of public bodies, such as municipalities and hospitals.
For Alfred Kammer, it is “important, as proposed by the Commission, to actually make this resolution regime available to a wider range of banks that can be included in that resolution regime”.
Source: DN
