After the bank tremors in the USA and Switzerland, the EU is trying to calm the financial markets. "I am very confident in terms of the liquidity and resilience that our banking system has built up," said Eurogroup chief Paschal Donohoe on Friday at the EU summit in Brussels. "I also believe that our regulators, our institutions at national and European level, have played a very, very important role in strengthening the resilience of our banking system."
The eurozone has the necessary reserves and resilience to ensure the stability of the banking system right now, Donohoe said. "And that's due to political choices that have been made and proven. But we must never be complacent." Therefore, regulators continued to monitor developments in the banking system.
The trigger for the banking crisis at the beginning of March was the liquidation of the US financial group Silvergate Capital, which is geared towards the crypto industry. A few days later, the US money house Silicon Valley Bank, which specializes in start-up financing, was placed under the control of the US deposit insurance company FDIC and closed. Other small banks stumbled.
Credit Suisse in the downward pull
In Europe, the major Swiss bank Credit Suisse slipped into crisis after numerous scandals, criticism of poor risk management and outflows of money in the hundreds of billions. In order to prevent a conflagration and a global financial crisis in view of the nervousness in the banking industry, the government and supervisory authorities pushed the competitor UBS to take over. On the stock exchanges, bank values fell significantly as a result of the unrest.
Estonian Prime Minister Kaja Kallas also said that lessons had been learned from the banking crisis. "I think our banking system is pretty resilient," Kallas said in Brussels. However, more can be done. The banking union and the capital markets union are needed for the smooth functioning of the European economy. Irish Prime Minister Leo Varadkar expressed disappointment at the lack of progress on these issues.
The capital markets union is essentially about removing bureaucratic hurdles between the individual EU countries in order to give companies more opportunities to raise money. Consumers should also have more opportunities for cross-border investments. The EU Commission's plans for a capital markets union have been on the table since September 2015, but implementation is faltering. In the banking union, a common European deposit insurance EDIS is particularly controversial.
fears in Germany
There is resistance above all in Germany, where there have long been well-stocked pots for emergencies. Savings banks and cooperative banks in Germany fear that their money will be used to finance the difficulties of institutions in other countries. Donohoe said progress on building the banking union now needs to be sustained.
As part of the EU summit, the heads of state and government and the President of the EU Commission also came together for the so-called Euro Summit. The President of the European Central Bank, Christine Lagarde, also attended.
Inflation was also discussed during the talks. Although recently down, it remains high in the euro zone and some economies, Donohoe said. "And there are signs that the nature of inflation is changing, that it is now affecting not only the energy sector but also other areas of our economy." You will have to react to this in the long term with budgetary policy.