(Brussels) European Central Bank (ECB) President Christine Lagarde on Friday reaffirmed the soundness of the euro zone’s banking system to EU leaders at their summit, as fears of a financial crisis tumbled Friday markets.
“The euro area banking sector is resilient, as it has strong capital and liquidity positions,” Ms. Lagarde told European Union (EU) Heads of State and Government in Brussels, according to a European official.
German Chancellor Olaf Scholz wanted to be reassuring about the state of health of Deutsche Bank, the first German bank, in sharp fall on the Frankfurt Stock Exchange.
“Deutsche Bank has fundamentally modernized and revamped its business model and is very profitable. There is nothing to worry about,” he said after the summit.
“The banking system is stable in Europe,” he said.
“The fundamentals of European banks are solid […] The euro zone is the zone where the banks are the most solid,” said French President Emmanuel Macron.
Ms. Lagarde pointed out that the Eurozone had “applied to all institutions the internationally agreed regulatory reforms after the global financial crisis”.
“Recent events remind us how important it was to continually improve these regulatory standards. We now need to make progress on completing the banking union,” she said during the meeting with the leaders, again in reported comments.
“Further efforts are also needed to create truly European capital markets,” said Lagarde.
She repeated her words of the last days. “There is no trade-off between price stability and financial stability. Our toolbox allows us to deal with the risks that weigh on both,” assured the President of the ECB.
“As far as financial stability is concerned, the ECB has all the necessary tools to provide liquidity to the eurozone financial system, if necessary,” she said.
Equity markets fell on Friday in Europe, weighed down by banking stocks, as concern spread over their health after the failures of three regional banks in the United States and the rescue of Credit Suisse.
The sharp rise in the cost of default risk insurance (CDS) is fueling concerns about the resilience of European banks.