Saturday

10th Dec 2022

EU officials defend health of European banks

  • ECB chief Jean-Claude Trichet has said there is enough liquidity in the European financial system (Photo: Council of European Union)

EU officials have strongly defended the health of European banks following unexpected criticism by Christine Lagarde, head of the International Monetary Fund.

European Central Bank chief Jean-Claude Trichet and Olli Rehn, EU monetary affairs commissioner, on Monday said Europe's financial system had both sufficient liquidity and capitalisation.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

"There is no liquidity or collateral shortage for the European banking system," Trichet said during a special hearing on the eurozone crisis organised by the European Parliament.

He went on to spell out that euro banks had €14,000 billion in collateral to cover short-term cash injections from the eurozone central bank – and that the ECB has promised open-ended lending to any European bank that needs cash.

For his part, Rehn pointed to the stress tests for 90 banks published in July as reason for confidence in the sector.

"EU banks are significantly better capitalised now than they were one year ago," he said.

"This has been confirmed by the stress tests in July. In the run-up of the tests, European banks increased their capital by some €50 billion."

The broadside by Lagarde – made during an international gathering of finance experts in the US over the weekend – took EU officials by surprise.

Lagarde said the old continent's banks are in "urgent" need of an injection of public-sector capital.

Talk about the health of European banks has slid down the agenda as the eurozone government debt crisis took centre stage in recent weeks.

But while EU officials have rebuffed Lagarde's criticism, the European Banking Authority, a supervisory set-up, appears to agree with her assessment.

According to a report Tuesday in the Financial Times Deutschland, EBA chief Andrea Enria in a letter to EU finance ministers is demanding that the eurozone bailout fund be allowed to give aid directly to troubled banks. Enria believes this would calm the financial markets concerned about banks' exposure to troubled eurozone countries.

At the moment the European Financial Stability Facility may give money only to governments. These can then pass it on to financial institutions.

IMF issues warning about European banks

IMF head Christine Lagarde has called into question the health of European banks amid a stark warning about a global economic slowdown.

Stakeholders' Highlights

  1. Nordic Council of MinistersLarge Nordic youth delegation at COP15 biodiversity summit in Montreal
  2. Nordic Council of MinistersCOP27: Food systems transformation for climate action
  3. Nordic Council of MinistersThe Nordic Region and the African Union urge the COP27 to talk about gender equality
  4. Friedrich Naumann Foundation European DialogueGender x Geopolitics: Shaping an Inclusive Foreign Security Policy for Europe
  5. Obama FoundationThe Obama Foundation Opens Applications for its Leaders Program in Europe
  6. EFBWW – EFBH – FETBBA lot more needs to be done to better protect construction workers from asbestos

Latest News

  1. EU Commission silent on Greek spyware sale to Madagascar
  2. A plea to the EU from inside Tehran's Evin jail
  3. EU lets Croatia into Schengen, keeps Bulgaria and Romania out
  4. Energy crisis costs thousands of EU jobs, but industrial output stable
  5. Illegal pushbacks happening daily in Croatia, says NGO
  6. No, Bosnia and Herzegovina is not ready for the EU
  7. EU takes legal action against China over Lithuania
  8. EU Commission shoring up children's rights of same-sex parents

Join EUobserver

Support quality EU news

Join us