The banking crisis has been in the headlines in Europe in recent weeks. So do we have reason to fear the collapse of the financial system?
No information on this, the experts answer.
Analysts and investors who follow the financial industry are going through Europe with a dense comb from bank to bank, but so far no trouble spots have been caught.
Now we still live as if on a knife’s edge, and even a small problem can worsen the situation, the head of the department of the Financial Supervisory Authority Samu KurriFinanssiala FA’s leading lawyer Olli Salmi and chief strategist of Nordea Antti Saari describe.
For example, in Germany, the largest euro economy we are afraid (you switch to another service)that the banking crisis would lead to at least two years of recession in the already troubled economy.
What are the risks that all bank customers should be aware of?
1. Interest rates
– The most acute crisis seems to be behind us now. But since these rapid increases in interest rates caused the problems in the United States, of course this situation needs to be monitored, says Olli Salmi of the banks’ FA interest organization.
European risks are the same as elsewhere. The supervisors are monitoring what kind of changes can be expected in bank holdings when economic growth rates seem weaker and especially interest rates are tighter than before.
2. The United States
Since the world’s financial system is strongly interdependent, additional problems in the United States would also be felt in Europe. According to Nordea’s Antti Saare, the weakest link in the system can be found on the west coast of the Atlantic.
– I wouldn’t talk about a banking crisis, but I wouldn’t say that we are in clear waters either.
The island is still not too worried about Europe, because after the financial crisis, the banks here have been significantly strengthened. The solvency of banks has been improved by legislation and stricter supervision.
– The fairly moderate regulation in the United States is a certain kind of risk. There might still be something from small banks, says Saari.
If problems arise in Europe, they will be taken care of, he believes.
– At last from the authorities.
Unlike in the United States, in Europe even small banks are subjected to stress tests in case interest rates rise, and the capital requirements are as strict for them as for large banks.
There are also not as many specialized banks in Europe as in the United States. The most famous of the failed banks in the United States, i.e. Silicon Valley Bank, specialized in deposits for growth companies in the technology sector.
European “universal banks” are protected by the fact that their funding and assets are decentralized.
3. Uncertainty
The biggest risk to the financial system is general uncertainty.
– The market is very nervous, which means that even small news or mere rumors can lead to significant price changes, even if there is nothing behind them, says Samu Kurri.
For example, Italy is no longer a real risk for the banking system. The situation there has changed over the past few years, and the country’s largest banks are on a firmer footing than before.
– You cannot say that there is a country where all the banks are bad or that there is a country where all are so good that there is nothing bad, Kurri formulates.
4. Properties
In history, banks have often incurred credit losses during real estate bubbles – that is, when the prices of real estate and housing have risen disproportionately fast compared to the people’s disposable income.
Banks have learned their lesson and are trying to protect themselves, for example, from the fact that tenants would no longer pay their rent and landlords in trouble would have to sell their apartments “underpriced”.
According to Kurri, the credit loss risks are lower now than in the financial crisis that started 15 years ago and the euro crisis that followed.
– The conditions of the banks that were in the worst financial crisis have improved since then. The share of non-performing loans is less than two percent of all loans in Europe, Kurri points out.
The Swedish bubble is the biggest on the risk list
In Sweden, real estate prices have risen so much that we are already talking about it from the bubble (you switch to another service). For example, The Economist business magazine lists (you switch to another service) countries at risk of housing bubbles in the world, and Sweden is at the top of the list.
– There will definitely be some kind of recovery there, but I don’t know if it’s such a big problem. It seems that the prices are mostly returning to their previous levels, says Antti Saari.
In that case, a large part of the people would not be in trouble, but only those who have bought at an “excess price”.
In its analysis, The Economist has compared four factors: the rate of price increase in recent years, the relative number of mortgage borrowers, the share of loans with variable interest rates and the ratio of mortgage loans to borrowers’ income.
In Finland too, there is mistrust of real estate investment companies, which is why their share prices have weakened for some time, Kauppalehti says (you switch to another service).
The European Central Bank, on the other hand warned on Monday (you will switch to another service) commercial real estate and especially the risks of real estate investors in the euro area.
Real estate prices have fallen sharply recently at the same time that those who invested with debt must be able to pay an increasingly higher interest rate on their loan.
Does the situation of the financial system give rise to thoughts? You can discuss the topic until 23:00 on Thursday evening.
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