The governor of the French central bank believes that European rules ensure sufficient liquidity for banks on the Old Continent.
The governor of the French central bank, François Villeroy de Galhau, wanted to reassure in a context marked by the collapse of several American banks and by the faltering of the second private bank in Switzerland. “French and European banks are extremely solid“, he said Friday, the day after another rate hike by the European Central Bank in full turmoil for the banking system.
“European banks are not in the situation of certain American banks for a very simple reason which is that they are not subject to the same rules“, he added on BFM Business, in reference to the recent bankruptcies of regional banks in the United States which rocked the markets. The governor highlighted the Basel III regulations put in place after the 2008 financial crisis, “sometimes criticized“but who proved the”efficiency” rules “on their liquidity and on their own funds“.
According to him, 400 European banking groups are subject to this regulation against 13 in the United States, the largest establishments. François Villeroy de Galhau spoke of a decision “taken at the time of the Trump administration in 2019 (…) which consisted in exempting medium or small banks from the Basel III rules”, recalling that the regional banks which went bankrupt last week in the United States were part of it.
Credit Suisse, “a special case”
These bankruptcies led to a fall in the stock markets, which recovered at the start of the week before plunging again with fears about the health of Credit Suisse. The second Swiss bank tried to reassure in the middle of the week by announcing to borrow 50 billion Swiss francs (50.6 billion euros) from the country’s central bank for its restructuring.
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Credit Suisse is “a particular case known for several years», underlined François Villeroy de Galhau. “It is a bank that has both business model difficulties (…) and failures in its internal control system“, he added, encouraging the establishment to go”after work» recovery.
This crisis did not prevent the European Central Bank from continuing its fight against inflation by increasing its rates by 0.5 percentage points as planned on Thursday. “I confirm the priority to the fight against inflation“said the governor. “I believe that we have sent a signal of confidence which is strong and which is twofold, it is both confidence in our anti-inflation strategy and confidence in the solidity of European and French banks“, he continued.