09/08/2013
Investors doubt the efficiency of the European banking union
In the opinion of most European investors, the banking union act currently being debated in Brussels would not reduce the default risk for euro zone banks, according to a study of investors managing a total of EUR5.6trn in assets carried out in July, and published on 8 August by the financial ratings agency Fitch Ratings. More than one third of them (39%) claim that the risk will not be reduced, since the three pillars of reform (single supervision, resolution mechanism and a guarantee for deposits) will not be applied in full. One quarter of invetors surveyed (27%) also think that the establishment of a non-public resolution mechanism suggests that the banks would have less chance of being bailed out in the case of bankruptcy. According to the study, only 28% of investors feel that the changes to European legislation would permit default risks ot be reduced, a sentiment which has however, improved since the publication on 10 July this year of a draft resolution mechanism for banking crises. The ratings agency Fitch estimates that the first area of banking union, single supervision, will bring coherence and will allow for the risk levels at varius euro zone banks to be compared, which would allow for bankruptcy risks ot be reduced. However, the resolution mechanism makes a public solution for banks less likely, according to Fitch, which could lead investors to favour establishments which are considered safer. The study also finds that investors are increasingly trusting the banking sector in general, as reflected in their portfolios and their recommendations.
