PEAN governments should focus on getting their houses in order and should not force blanket recapitalisation on the region’s banks, according to the head of the British Bankers’ Association (BBA), the industry body.
BBA chief Angela Knight told City A.M. that bailing out banks should only be done if necessary as the third leg of a rescue plan: “You’ve got to solve the problem in sovereign countries in the first place,” she said. “We’re not talking about a banking crisis. It’s a sovereign debt problem.”
Germany’s deputy finance minister and incoming chief economist of the ECB Jörg Asmussen said on Monday that any bailout should involve a blanket recapitalisation of all banks across the EU to avoid any “stigma” from accessing rescue funds.
But Knight says: “A blanket bailout is not required… It’s not a question of stigma, it’s one of fact. You’ve got to sort out the sovereigns first. You can’t expect recapitalising banks to address the solvency of a sovereign.”
Knight was adding her voice to that of her German counterpart, Michael Kemmer, who said that a blanket bailout would penalise banks that have enough capital.
Analysts are similarly dubious. Collins Stewart Hawkpoint’s Matthew Czepliewicz said: “The source of the problem is sovereign debt – what was once considered a risk-free asset class... There’s a circularity in making banks recapitalise in order to comply with a regulatory framework when key parts of the framework have been called into question.”
Société Générale chief Frederic Oudéa has also said that a recapitalisation scheme will not solve the crisis.