Banker and economist Lorenzo Bini Smaghi tends to reassure us about the stability of the European banking and financial system. In case of need, moreover, the European Central Bank will intervene, which will only have to be careful not to create negative consequences for inflation. «Europe has the necessary tools to face a banking crisis that comes from outside and that, given the rules in force in the Euro Zone, would not have found ground to develop in Italy. The European Central Bank is willing to provide all the necessary liquidity to the eurozone financial system, but it will have to find a balance between reassuring the markets and measures to fight inflation, a battle that is certainly not over”. These are the assessments of Lorenzo Bini Smaghi – a banker and economist who from June 2005 to the end of December 2011 was a member of the executive committee of the European Central Bank – in the face of the new banking crisis triggered by the bankruptcy of the United States Bank of Silicon Valley.
«All banking difficulties – explains Bini Smaghi to Corriere della Sera – generally concern the specific business model, inadequate to deal with sudden changes in the markets. In the case of SVB, there was a concentration of large deposits, little asset diversification, mismatch between assets and liabilities at maturities and, at best, poor governance. It is surprising that the US regulator has not been more careful». For Bini Smaghi «It is paradoxical that Europe is affected in this way by crises that arise from banks located outside its supervisory area. The European system has been greatly strengthened since 2014 with the creation of the single supervisory system and does not involve these specific vulnerabilities present in the United States. However, the European system was not completed. In particular, it lacks an integrated deposit insurance system and a single capital market. This is a factor of fragility for Europe”.
Source: IL Tempo
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
