BGA Cable:  EU Bank Resolution

For whom the bell tolls -end of an era of ECB Regulatory forbearance? 

More than two years into the Banking Union, the ECB has shown renewed vigor in using its powers, declaring three smaller banks, Spain’s Banco Popular and Italy’s Veneto Banca and BP Vicenza, as failed or likely to fail within a month. The circumstances differ. The Spanish intervention was precipitated by a silent deposit run while the bank was still in compliance with regulatory ratios. In contrast, the Italian resolution decision came after the banks were found to be in breach of capital ratios without any remedy in sight despite months of negotiations.

With the 2018 EBA stress test currently underway, these interventions are unlikely to be the last by the ECB and its EU banking regulator, the SSM. Problems persist in Greece, where the entire system remains heavily reliant on ECB funding as well as in lesser known parts of the unlisted banking sector, such as the German Landesbanks (NordLB, HSH) or in smaller regional banks in Spain (Liberbank) and in Italy (Monte dei Paschi). 

Contact BGA to read the full cable.

Our Associates are closely monitoring developments so we can keep you updated on the EU banking sector and their potential implications for financial markets.  Contact us to schedule a call with our experts to hear our more detailed views.  

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