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10th Inter-Balkan Forum of Banking Associations
16 October 2009 - Sarajevo, Bosnia & Herzegovina
European Banking Sector
in a period of Global Financial and Economic
Viktorija Proskurovska
Adviser, Economic and Monetary Affairs and Relations with Associates
of the European Banking Federation
Significance of the crisis
Evaporation of liquidity in the inter-banking market;
Bankruptcies of financial giants, causing systemic risk;
Loss of public trust in the financial sector;
Deterioration in general economic conditions;
Increase of the government share in the private sector
(causing unlevel playing field).
Global estimated loss: USD 3.4 trillion (about € 2.3 trillion).
EU GDP might fall by 4% in 2009,
US GDP may decrease 2.6% in 2009.
Reaction of banks
Reflect on their weaknesses;
Reduce their costs and improve returns;
Clean-up their balance sheets;
Adapt their business strategies.
Reaction of the ECB
and national governments
More liquidity and capital:
• Euro-area Governments committed about 35% of GDP to
financial sector support measures;
• Eurosystem’s balance sheet had almost doubled.
Negative consequence:
• Increased public ownership in the EU banking sector.
Regulatory response by the
European Commission
EU Commission is working on the body of legislation on:
• supervisory architecture;
• capital requirements;
• accounting principles;
• remuneration policies;
• hedge funds, UCITS, etc.
to ensure the right incentives, reduce gold-plating, and
strengthen risk management and prudential oversight.
• Benefits of euro membership:
– confidence in the currency (avoid sharp devaluation during
– ECB measures to enhance market liquidity enabled euro area
countries to avoid a credit squeeze.
• Challenges:
– Differences in the pricing of euro member countries’ debt and
credit default insurance have widened.
Current EU-level priorities are:
– Need for effective government exit strategies;
– ECB to continue facilitating the working of financial markets;
– EU authorities to finalise their proposal for the Regulation on
banking supervision;
– banks to continue their operations while reforming internal
Thank you!
For contacts:
Viktorija Proskurovska
Adviser in Economic and Monetary Affairs, Associates
European Banking Federation
[email protected]