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10 th Inter-Balkan Forum of Banking Associations 16 October 2009 - Sarajevo, Bosnia & Herzegovina. European Banking Sector in a period of Global Financial and Economic Crisis. Viktorija Proskurovska

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European Banking Sector in a period of Global Financial and Economic Crisis


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european banking sector in a period of global financial and economic crisis

10th Inter-Balkan Forum of Banking Associations

16 October 2009 - Sarajevo, Bosnia & Herzegovina

European Banking Sectorin a period of Global Financial and Economic Crisis

Viktorija Proskurovska

Adviser, Economic and Monetary Affairs and Relations with Associates of the European Banking Federation

significance of the crisis
Significance of the crisis
  • Evaporation of liquidity in the inter-banking market;
  • Bankruptcies of financial giants, causing systemic risk;
  • Loss of public trust in the financial sector;
  • Deterioration in general economic conditions;
  • Increase of the government share in the private sector (causing unlevel playing field).

Global estimated loss: USD 3.4 trillion (about € 2.3 trillion).

EU GDP might fall by 4% in 2009,

US GDP may decrease 2.6% in 2009.

www.ebf-fbe.eu

reaction of banks
Reaction of banks
  • Reflect on their weaknesses;
  • Reduce their costs and improve returns;
  • Clean-up their balance sheets;
  • Adapt their business strategies.

www.ebf-fbe.eu

reaction of the ecb and national governments
Reaction of the ECB and national governments

More liquidity and capital:

  • Euro-area Governments committed about 35% of GDP to financial sector support measures;
  • Eurosystem’s balance sheet had almost doubled.

Negative consequence:

  • Increased public ownership in the EU banking sector.

www.ebf-fbe.eu

regulatory response by the european commission
Regulatory response by the European Commission

EU Commission is working on the body of legislation on:

  • supervisory architecture;
  • capital requirements;
  • accounting principles;
  • remuneration policies;
  • hedge funds, UCITS, etc.

Aim:to ensure the right incentives, reduce gold-plating, and strengthen risk management and prudential oversight.

www.ebf-fbe.eu

the euro
The EURO
  • Benefits of euro membership:
    • confidence in the currency (avoid sharp devaluation during crisis);
    • ECB measures to enhance market liquidity enabled euro area countries to avoid a credit squeeze.
  • Challenges:
    • Differences in the pricing of euro member countries’ debt and credit default insurance have widened.

www.ebf-fbe.eu

conclusion
Conclusion

Current EU-level priorities are:

  • Need for effective government exit strategies;
  • ECB to continue facilitating the working of financial markets;
  • EU authorities to finalise their proposal for the Regulation on banking supervision;
  • banks to continue their operations while reforming internal procedures.

www.ebf-fbe.eu

thank you
Thank you!

For contacts:

Viktorija Proskurovska

Adviser in Economic and Monetary Affairs, Associates

European Banking Federation

v.proskurovska@ebf-fbe.eu

www.ebf-fbe.eu

www.ebf-fbe.eu