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.