Too Many Banks Out There in the Eurozone?

Written by | Wednesday, November 20th, 2013

According to Europe’s chief banking regulator, too many banks have survived the ongoing economic crisis. Andrea Enria, the boss of the European Banking Authority (EBA), said he was convinced that too few banks and financial institutions had vanished as a result of the financial crisis. In Europe, only about 40 banks went bankrupt while in the United States there were about 500 of them. Mr. Enria said that the governments were trying their best to save the banks, but this has actually slowed down the recovery. Interestingly, the EBA has organized a series of stress tests in recent years, which have been to a great extent considered too lenient towards banks.
One of the CEOs, Juergen Fitschen of Deutsche Bank, added that investors still lack confidence in the European market. The fact that government mercy with banks during the crisis was too big is among the main causes of sluggish economic recovery, Mr. Fitschen thinks. Therefore, he argues that banks must be allowed to go bankrupt in the future. In his opinion, there are too many failing banks out there that are being kept alive without making any contribution to the process of change.
Mr. Enria commented that the newly created banking union, which is still currently being negotiated, should enhance and strengthen the EU’s banking sector. He added that he embraced the idea of Europe-wide banking regulations keeping an eye on the developments within the financial sector. In his opinion, such a stable body could potentially do much better in times of a crisis since the hitherto method of problem savings – ad hoc committees – were fighting internal conflicts during their decision making.

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