PARIS, FRANCE — European banks are in “extremely solid” shape and their situation is not similar to that of some US lenders, France’s central bank chief said Friday amid fears of a crisis in the sector.
The failure of two US lenders has raised fears of contagion to the wider sector, with troubled European banking giant Credit Suisse having to borrow up to $54 billion from the Swiss central bank.
“French and European banks are extremely solid,” Francois Villeroy de Galhau, who is also a member of the European Central Bank’s governing council, told BFM Business television.
“European banks are not in the same situation as certain American banks for a very simple reason which is that they are not subjected to the same rules,” he said.
Rules known as Basel III that were created after the 2008 financial crisis to ensure that banks have adequate capital and liquidity have been “effective”, Villeroy de Galhau said.
He said 400 European banking groups are subject to the Basel III requirements compared to only 13 in the United States.
Under Donald Trump’s presidency in 2019, small- and mid-sized US banks were exempted from the Basel rules, he said, noting that Silicon Valley Bank and Signature Bank, which collapsed last week, were among them.
The French central bank governor said Credit Suisse was a “special case”.
“It’s a bank that has both business model difficulties … and failures in its internal control system,” he said.
The ECB said Thursday it stood ready to provide liquidity to ensure the stability of the eurozone’s financial system.
But the eurozone’s central bank stuck to a hefty interest-rate hike of half a percentage point to battle inflation, despite fears rising borrowing costs may add further stress on banks.
“I confirm that the priority is the fight against inflation,” Villeroy de Galhau said.
He said the ECB’s move sent a “strong” sign of confidence in its anti-inflation strategy and the solidity of European and French banks.
— AFP
