Live from London

Leaders under pressure to strengthen European banks

Caitlan Reeg Oct 5, 2011
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Live from London

Leaders under pressure to strengthen European banks

Caitlan Reeg Oct 5, 2011
HTML EMBED:
COPY

Steve Chiotakis: The Financial Times reports the massive Greek debt has European finance ministers looking for ways to shore up some of the biggest banks there — banks that are exposed to bad sovereign debt.

Reporter Caitlin Carroll has more from Berlin.


Caitlan Carroll: European governments are feeling a sense of urgency to strengthen the capital position of the banks.

Jobst Fiedler is a Professor of Public and Financial Management at the Hertie School of Governance in Berlin. He says those banks in a weakened position would fail.

Jobst Fiedler: It’s like in the African desert, that animal which is limping is caught first. That means then the, not only the shareholders would devalue the bank, but those who have deposits would have a run on those banks.

Fiedler says in order for European governments to coordinate efforts to support the banks, there needs to be greater clarity on the financial system of these banks. The other thing that needs to change is more action — less talking.

Fiedler: In the U.S. you had not really large hesitations to capitalize one of your endangered banks after the Lehman crisis. In Europe, in some countries, it still has to be overcome that the state has to directly intervene, becoming bank shareholders.

And convincing a bailout-weary public that the banks deserve help may be the toughest hurdle of all.

In Berlin, I’m Caitlan Carroll for Marketplace.

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