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Europolitics Watch: Are EU banks actually less exposed?

Are EU banks more solid and protected from bank runs and instability in the banking system? Have the EU set up safe-guards that will keep the European Banks safe? We take a closer look and are not overly convinced.
2023-03-17

The fear of contagion from the Silicon Valley Bank (SVB) collapse has heightened over the week with Credit Suisse’s life hanging in the balance until late last night. On Monday, Eurogroup President, Paschal Donohoe, was quoted for stating that the European bank sector was “rock solid”. According to Donohoe, recent regulatory decisions in the EU means that European banks are less exposed to the risks which took down SVB. Is that true? Is the EU regulatory framework leaps ahead of the U.S or is Mr Donohoe just trying to preserve the precious trust of European customers in their banks? We have taken a closer look..

 

EXECUTIVE SUMMARY:

  • The regulatory provisions which made SVP ripe for collapse include the U.S accounting standards on bonds, risk weighting of sovereign securities, regulation on deposit guarantees and LCR requirements. We have taken a look at the legislation on each of theseparameters to see how they match up with equivalent EU law. 
  • In reality,

Are EU banks more solid and protected from bank runs and instability in the banking system? Have the EU set up safe-guards that will keep the European Banks safe? We take a closer look and are not overly convinced.

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