German Chancellor Olaf Scholz said Deutsche Bank was profitable after shares fell greater than 10% during European trading.
Ludwik Marin | afp | Getty Images
BRUSSELS — European leaders on Friday wanted to emphasise that the banking sector in the region is stable and healthy German banka sudden drop as markets opened as much as trade.
German Chancellor Olaf Scholz told reporters at the EU summit that German bank is a profitable business with no reason to fret.
The German lender has “modernised and arranged the way it really works. It’s a really profitable bank and there is no such thing as a cause for concern,” he said, in keeping with the translation.
The German lender’s shares traded greater than 14% lower on Friday after Thursday evening’s rise in credit default swaps – a variety of insurance contract against insolvency. That is just just a few days after the rescue operation Credit Suisse and the collapse of Silicon Valley Bank, in addition to several measures taken by state authorities to avoid spreading the virus throughout the financial sector.
French President Emmanuel Macron also told reporters in Brussels that the banking system was sound, while European Central Bank President Christine Lagarde said the eurozone was resilient since it had strong capital and solid liquidity positions.
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“The euro area banking sector is powerful because now we have applied internationally agreed regulatory reforms in all of them after the global financial crisis,” she said, in keeping with EU sources.
The 27 EU leaders gathered for his or her usual end-of-quarter meeting. Geopolitics dominated the first day of talks, but turmoil in the banking sector took center stage on Friday. This was especially because the leaders’ talks took place in parallel to the sharp sell-off of Deutsche Bank shares.
In the run-up to the meeting, European officials voiced their frustration at the lack of regulatory control in the US, where the recent banking turmoil first hit. They feared the potential contagion of their very own banking sector, mainly because not so way back European banks were in the depths of a worldwide financial crisis.
“The banking sector in Europe is far stronger because we weathered the financial crisis,” Estonian Prime Minister Kaja Kallas told CNBC on Thursday.
Following the shock of 2008, European banks underwent massive restructuring and needed to significantly strengthen their balance sheets.
Nevertheless, the EU remains to be somewhat vulnerable to shocks, on condition that it has a eurozone monetary union with 20 countries sharing the euro, but lacks a fiscal union. Fiscal policy stays the responsibility of individual governments, not a single institution.
“We’d like to make progress on the banking union; further work is required to create truly European capital markets,” Lagarde told EU 27 heads of state on Friday.
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The banking union is a algorithm introduced in 2014 to strengthen European banks. The controversy has been politically sensitive, but the reality that prime rates of interest will remain has made it much more pressing.
The thought behind a real capital markets union is to facilitate lending across a region where often national bureaucracies can vary from country to country.