Europe’s €30 trillion headache

Friday, July 30, 2010
By Paul Martin

European banks have amassed €30 trillion in liabilities and face a serious funding threat over the next two years as authorities withdraw emergency support, according to a new report by Standard & Poor’s.

By Ambrose Evans-Pritchard
TelegraphUK
29 Jul 2010

The rating agency said banks are at risk of a vicious circle as sovereign debt fears and financial stress feed off each other. “Banking sector woes are eroding sovereign credit-worthiness, which is in turn reducing the real and perceived capacity of governments to support weak banks,” said S&P.

“The collective funding needs of Europe’s banks are vast. The industry is much larger than America’s or Asia’s. Most of their mortgages and other personal loans stay on their balance sheets and require funding. This contrasts with the US, where financial institutions securitize (these) loans and which do not require balance sheet funding,” said Scott Bugie, S&P’s credit strategist. Total liabilities are €23 trillion for the eurozone and €8 trillion for the UK, Sweden, and Denmark.

The Rest…HERE

Leave a Reply