Eurozone banks still command depositor trust

Published March 21st, 2023 - 08:47 GMT
Eurozone banking system
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ALBAWABA — Depositors still have "strong trust" in European Union lenders, a senior E.U. Central Bank official said on Tuesday, seeking to calm the banking sector after a series of bank failures triggered instability worries.


"Even in this period of turmoil, the liability side... of the European banks has remained very stable," Andrea Enria, head of the ECB supervisory board, told a European Parliament hearing.


"At the moment, we do have a strong trust of depositors in European banks," Enria added.


Authorities in leading economies have pledged support for depositors and troubled lenders in efforts to calm the markets after the collapse of Silicon Valley Bank and Signature Bank in the United States, followed by the Swiss government-backed buyout of troubled Credit Suisse by UBS.


"We are monitoring market developments closely and stand ready to respond as necessary to preserve price stability and financial stability in the euro area," ECB President Christine Lagarde told the European Parliament on Monday.


"The euro area banking sector is resilient, with strong capital and liquidity positions. In any case, the ECB’s policy toolkit is fully equipped to provide liquidity support to the euro area financial system if needed," added Lagarde, insisting that Eurozone banks are strong enough to withstand the upheaval.


U.S. Treasury Secretary Janet Yellen told a conference of American banks, adding that she sees the banking sector "stabilizing".


"Our intervention was necessary to protect the broader U.S. banking system," Yellen added, indicating that further interventions could follow "if smaller institutions suffer deposit runs that pose the risk of contagion".


Enria said officials were not seeing signs of major outflows of deposits from Eurozone banks, unlike the American banking situation.


"In general there are different structures... in the markets and different structures (of) the banks' liabilities that I think make these types of events less likely. But in any case, let's say again I think that our institutional set-up is fit for purpose," added Enria.


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