Skip to main content

European Banks Prepared for a Crisis?

European Banks Prepared for a Crisis?


Commerzbank building
The financial impact of the coronavirus surpasses the old worst-case scenarios, threatening a credit crunch or even a new financial crisis.

Some economists expect the European economy to decline by more than 10 percent in the first half of this year because of the pandemic, threatening an explosion of bad loans, deteriorating assets and plummeting share prices.

The question that regulators and central bankers are asking themselves now is whether the measures they took in recent years to crisis-proof the banking system will be enough to prevent a credit crunch, bank failures and a financial meltdown with global ramifications.
two Euro banknotes
Banks are under pressure anywhere on the planet that the virus has spread, which is virtually everywhere. The problem is particularly acute in Europe because many banks there never really recovered from the last financial crisis, which began in 2008 with toxic real estate debt, spread to eurozone government debt and took at least seven years to tame. Lenders like Deutsche Bank in Frankfurt are plagued by meager profitability, inefficient operations and the continuing cost of cleaning up old messes.

More than the United States, the European economy depends on banks to function. European companies get more than two-thirds of their credit in the form of bank loans, while American firms get less than one third directly from banks. They raise the rest by selling corporate bonds or shares.

person holding brown leather wallet and banknotes

There is no sign yet of bank failures, in part because the European Central Bank quickly flooded the financial system with cash.

Labels:

Comments

Post a Comment

Popular posts from this blog

Italy: Firms shake lockdown using shortcut in coronavirus law

Italy: Firms shake lockdown using shortcut in coronavirus law The government last week extended non-essential business closures to May 3. But more than 100,000 mainly small- and medium-sized companies have applied to keep going or partially reopen. In principle, a key hurdle for companies to do business should be that they can prove they are part of a supply chain to businesses that are deemed “essential” in a government decree, such as food, energy or pharmaceutical companies. But the government, facing a backlog of applications, has clarified Italy’s lockdown laws to say no companies need to wait for government approval to go ahead. More than 105,000 firms have applied to be considered part of essential supply chains, the interior minister said on Wednesday, in a guideline on its website to clarify the lockdown rules. Of those, just over 2,000 have been turned down and told to suspend their business. More than 38,000 are being investigated and the rest are waiting to be...
Post a Comment
Read more

German government overreacted on COVID-19

German government overreacted on COVID-19 Christian Drosten, director of Berlin's Institute of Virology at the Charité Hospital, spoke to The Guardian on Sunday, days after the country began lifting some lockdown restrictions. Germany's lockdown started to lift on April 20, with the opening of smaller businesses like car dealerships, bike shops, and book stores. The country plans to start reopening schools on May 4. Drosten said he felt like the government was being pressured to reopen, and that he feared that a blasé attitude toward the relatively tame outbreak in Germany could lead to a new burst of infections.  The basic reproduction number, also known as R0, represents the average number of people a single patient is expected to infect and is a key figure to measuring countries' outbreak. You can read Business Insider's explainer to it here. More: https://www.businessinsider.com/germany-coronavirus-restrictions-so-effective-people-think-overreaction...
Post a Comment
Read more

Volkswagen factory just reopened

Volkswagen factory just reopened The world's largest carmaker has made 100 changes to the way its plants operate as it tries to restart business without risking the health of hundreds of thousands of workers. Its experience underscores the daunting task ahead for manufacturers as they resume work in a world still reeling from the pandemic. "We have never developed, produced and sold vehicles under these conditions before," said Bernd Osterloh, the top labor representative at Volkswagen (VLKAF). The gigantic Wolfsburg plant is located on the banks of an equally impressive feat of human engineering, the 200-mile long Mittelland Canal connecting sea and inland ports in Europe. Originally built in 1938 to house workers for Volkswagen's factories, Wolfsburg is still home to the group's headquarters and has produced more than 45 million cars since 1945. It's where the iconic Beetle was produced for more than three decades and where the automaker's be...
Post a Comment
Read more