Concluding a two-day summit in Brussels on Friday, EU heads of state and governments stressed that banks in the eurozone are stable, stable and strong.
But his words contradict the realities of financial markets, with shares of Deutsche Bank, Germany’s largest lender, falling nearly 15% in Friday’s trading.
The drop was due to an increase in credit default swaps (CDSs), which represent the cost of insuring a bank’s default.
Other European banks, including UBS, Commerzbank, Societe Generale and BNP Paribas, were also less affected.
Financial markets have been in constant turmoil since the collapse of Silicon Valley Bank, the largest US bank since 2008, and the state bailout of Credit Suisse earlier this month This.
Despite reassurances from politicians, investors are showing clear signs of fear and discomfort, sending stocks up and down unexpected highs and lows.
Deutsche Bank shares have been hit hard, losing more than a fifth of their value in less than a month.
“Deutsche Bank has fundamentally modernized and repositioned its business model and is a highly profitable bank,” Federal Chancellor Olaf Schulz said on Friday.
– Don’t worry about anything.
Dutch Prime Minister Mark Rutte issued a positive note, praising the protections put in place after the 2008 financial crisis, which subsequently led to a severe debt crisis in the eurozone.
The collapse led to the creation of a banking union to harmonize rules, strengthen supervision of European banks and prevent defaults when necessary.
“There has been a lot of criticism from business and banking circles that we might be a bit too strict. But now that you know how important it is for us to have this buffer, we’ve taken this step,” said Rutte. He explained while answering Euronews questions.
“Overall, I think we’re doing pretty well.”
However, the banking union is not yet complete.
The third pillar, the European Deposit Insurance Scheme (EDIS), has been discussed since 2015 with no signs of progress. Coincidentally, the EDIS is designed to stop desperate banks like the ones that caused the Silicon Valley banking scandal.
Rutte called on EU countries to complete discussions on the banking union, but “not in response to what happened in the US or Credit Suisse”.
“We believe the existing regulations are strong enough, but we still need to take the final step,” Rutte said.
Eurogroup President Pascal Donoghue, who also participated in Friday’s economic debate, also expressed optimism about the health of European banks, calling them “resilient” and “strong”.
But when asked about Deutsche Bank, Donoghue played it safe.
Donoghue told reporters: “Obviously I’m aware of market developments. Given how they might change, it’s inappropriate to comment on them.”
“We have full confidence in the current position, stability and strength of our bank.”