This Bankruptcy and bailout of several banks in the United States and SwitzerlandRecent turbulences, such as Silicon Valley Bank and Credit Suisse, have confronted the Eurozone with a reality they believe has now been surpassed and forgotten: a new ghost Financial Crisis. A scenario that institutions and governments have recently dismissed, citing the soundness of the European banking system. Deutsche Bank’s shares fell more than 14% this Friday, sparking fears again just as Eurozone heads of state and government met in Brussels. “It is a very profitable bank. At the end of the summit, German Chancellor Olaf Scholz said there is nothing to worry about.
A European Council, attended by both ECB President Christine Lagarde and Eurogroup President Paschal Donohoe, is to assess the financial situation and turbulence that the markets have been experiencing in recent days. As suggested in the European Parliament last Monday, the head of European monetary policy conveyed to leaders that the European banking sector is resilient and has a “solid capital and liquidity position”, sources said. strong banking system Due to regulatory reforms adopted internationally after the 2008 financial crisis.
“Recent events remind us how important it is to continually improve these regulatory standards. Now we need to move forward and complete the banking union and continue to work towards creating a truly European capital market,” the same sources said, adding that the price stability and stability dilemma clarifies the message to European leaders. he got it. not available. financial. “Our toolbox enables us to face both risks”. And when it comes to financial stability, he made it clear that the ECB is fully equipped to “provide liquidity to the Eurozone financial system if needed.”
The same message of calm was conveyed to Donohoe. “Recent events in financial markets remind us that we need to stay vigilant and continue to control risks,” but “I trust the amount of liquidity and resilience our banking system has built up, and equally believe that our regulators, our institutions, have played a crucial role at the national and European level. strengthen the resilience of our banking system”, the Irishman explained.
Like Lagarde, the Irishman stressed that “we now have the reserves and resilience to stabilize our banking system.” Something that was the result of some decisions that were adopted by Eurozone governments at the time and that worked. Despite this, the eurozone’s gesture acknowledges that we cannot “stay indifferent” and that we must continue to “watch” events in the banking system. Taking advantage of his speech, the President of the Eurogroup asked Eurozone countries to continue developing the measures agreed last summer to develop and complete the banking union because “it could make a difference”.
“What we need to do now in the European Union is to continue our steady progress and build the banking union. We must implement and advance the agreements already in force. I am confident we can do more,” he said, adding that Italy is key to finalizing the approval process of the European Stability Mechanism (ESM), which is still pending approval, and to ensure that the Single Solution Fund does not run out of money. We need to make sure it has the support it will need from now on so we don’t ask taxpayers to pay for it if there are future banking difficulties.”
The banking union was created in response to the 2008 financial crisis and now consists of two elements: Single Supervisory Mechanism (SSM) and Single Resolution Mechanism (SRM). While SSM directly supervises the largest and most important banks in the eurozone at European level, the aim of SRM is to resolve failing banks in an orderly manner and at minimum cost to taxpayers and the real economy. The third element of the package was the creation of the European Deposit Insurance System (SESD), but it was withdrawn in 2022 and parked for now.