European Financial System remains shaky a decade after global crash

The European system ‘NOT in a good shape’ even 10 YEARS after global CRASH. These are the words of Andreas Treichl, the CEO of Austrian banking group Erste. According to Andreas, banks in Europe are still recovering after the Wall Street collapse that happened in 2008 and the 2011 eurozone debt crisis. However, the banking executive noted that the banks in Scandinavian countries seem to be outperforming others due to their limited cross-border activity across Europe.

“If you look at certain banks, in certain countries, they are doing extremely well. Most of them are actually non-cross-border banks,” said Mr. Treichl.

“You look at Scandinavian banks or banks that are located in Spain but only have foreign business outside of Europe.

“They do a lot better than those banks that play a game on European convergence and that should give a really good story to European politicians,” he continued.

According to a senior European Union official, another financial crisis is required for European political leaders to complete a banking union.

According to the director general for financial stability, financial services and capital markets union, Olivier Guersent, there must be “a big enough crisis for them to be scared enough, but not big enough to kill us”. While this might sound scary, it is worth noting that this seems to be the only lasting solution to Europe’s economic crisis.

The idea of a banking union first came to life after the 2008 financial crash, with the aim of creating a platform designed to shift the responsibility of banking policy from a national to EU level. The idea also welcomes countries outside the eurozone to be a part through an application.

“I have the impression that [EU member states] have the false impression that everything’s fine, but everything’s not fine and the job is half done,” says Mr. Guersent.

The concept of the banking union seems to be gaining grounds by the day as the German Chancellor, Angela Merkel recently claimed that EU leaders had reached an agreement to move forward with the bloc-wide financial proposals.

“Everyone is determined to put a package on the table by the December summit that describes the banking union of the future and also says something about the roadmap — i.e. the way to a deposit guarantee and describes progress on the capital markets union,” said Angela Merkel.

The imminent risk in the European financial system was recently reiterated with the IMF warning that the world’s economy is at risk of being crippled by “dangerous undercurrents” in the global financial system.

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