European banks appear stronger and more attractive than their US counterparts on many metrics, according to officials and analysts speaking at the Institute of International Finance conference in Brussels this week, who add that regulation and cooperation are still needed to boost growth in the region.
For her part, the CEO of the Spanish Santander Group, Ana Botín, said that the largest bank in the United States is equal to the largest 9 or 10 European banks due to weak growth and low profitability since the financial crisis of 2008.
However, the big European banks have better levels of credit default swaps, a form of insurance for bank bondholders against the risk of default, “which means fixed income investors think our debt risk is lower than the best banks in the US,” according to him. for Putin.
She said that the recent fluctuations that led to the sale of Credit Suisse to its Swiss competitor “UBS” are not evidence of a systemic banking crisis, but on the contrary of mismanagement and liquidity issues in certain banks.
She also emphasized, “We are in a very strong position in terms of capital, liquidity control and protecting our customers’ data. But we also need more capabilities to support growth so that we can generate more profits,” according to CNBC.
“What we need is a fundamental rethink of what we want the banks to be in the new economy in a world that needs to grow. Finding that balance is really important between being prudent, we’re not saying we have to go backwards, but also being able to fund the growth”.
On the other hand, Allianz Global Investors said that Italian banks have the greatest need among European lenders for liquidity to replace cheap funding from the European Central Bank that is due to expire this year and next.
The country’s banks have taken in more so-called “TLTROs”, ultra-cheap funds designed to stimulate credit for the economy, than their reserves, according to Simon Otten, credit analyst at Allianz GI in Paris.
Ranking of the status of banks in European countries
The analysis shows that Greek and Spanish lenders came in second and third. He said that banks have the possibility of taking advantage of the market to obtain funds or access to other European Central Bank facilities, and Italian banks have “reliable” plans to manage the process, according to “Bloomberg” agency, and “Al Arabiya.net” reviewed it.
In turn, the CEO of “Algebris Investments”, David Serra, said that European banks are “safer, stronger and cheaper” than American banks, who pointed to the high liquidity ratio for European banks – about 160% – compared to 120% for American banks.
Delaying the banking union
Jose Manuel Campa, head of the European Banking Authority, pointed to the lower valuations of European banks, but said these were improving amid the broader sector turmoil, and as interest rates rose it would boost their yields.
“I think with interest rates going up, if they continue,” he said [البنوك الأوروبية] In showing that its business model is sustainable, we should see improvements over the medium term in those valuations as well.”
Kampa believes that any further integration into European banking should be about creating better banks and “moving forward in promoting a more integrated EU single market so that we can have cross-border banking and more efficient services for European customers.”
The EU has a long-awaited plan to further develop its banking union, a set of laws introduced in 2014 to strengthen banks, create a common system in deposit insurance and other areas. Talks are also underway about a capital markets union.
crisis in Italy
And unlike the US, where several smaller banks collapsed earlier this year, all European lenders are subject to the Liquidity Coverage Ratio. This means that they have to hold high-quality liquid assets equivalent to the outflows they expect for more than 30 days of stress. The European Central Bank focuses on liquidity levels as a priority in its annual review of risks to the sector this year.
“If Italian banks do nothing, they will end up at an aggregate level of less than 100%, so they will breach the liquidity coverage ratio,” Otten said.