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СЛАЙД 7
Хе́рман Ван Ро́мпёй The European Union's president
After events in Greece Summit was held, where bank creditors of Greece were forced to write off half of its debt (about 100 billion euros).
- increase of additional reserves by 9%
The largest banks of Europe were instructed to increase the amount of additional reserves by 9% (in all 106 billion euros).
- financial stabilization framework
In addition financial stabilization framework was created for attracting foreign public and private funds in order to finance European stabilization projects. European Council President also announced consolidation of banking system.
- Thresholds in minimum 9% for banks’ own funds through recapitalization
EU Summit conformed a minimum of threshold of banks’ own funds through recapitalization. It is 9%. These measures were taken in order to protect the rest of the country from the same problems, but as we know, they didn’t bring the expected result.
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СЛАЙД 8
The reason is that close relationship of the global financial system makes banking system of separately taken countries dependent on each other. It means that if one country doesn’t perform its payment obligations, it leads to losses of the country creditors’ banking system. Hereby, the chain reaction went: Greece -> Ireland -> Portugal ->Spain -> Italy -> Cyprus.
However, the catalyst of the crisis in each country was its own.
The growth of public debt in these countries made them unattractive for foreign investors automatically and as a result, banks in these countries lost a significant share of funds to raise. Partly catalysts of these events were international rating agencies, which marked down the credit ratings of many countries in Eurozone. It became the cause of panic of foreign investors.
СЛАЙД 9
Nevertheless, the EU is still trying to solve the pressing problems. That’s why in autumn of 2012 European Stabilization Mechanism Began to operate. It helps to 5 most problem countries in 5 areas: sovereign loan; banking recapitalization program; preventive financial assistance; primary market assistance and secondary market assistance.
The main direction is focused on the stabilization loan but some experts believe that it’s not enough to improve the situation. They confirm that economic regulation of Greece, Portugal and Spain can’t exist at all. Another measure adopted by the EU in order to meet the crisis was the policy of austerity in countries affected by the crisis.
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СЛАЙД 10
European Central Bank (ECB) reduced based interest rate from 1% to 0,75%. It became an all-time low level of the base interest rate in the history.
At the same time another unprecedented step was made: the rate for one-day deposit decreased from 0,25% to 0. This was done for banks because they are afraid to become creditors for each other and preferred to keep the funds in the accounts of ECB. This was exactly that measure, which could revive the interbank market.
The last measure was creation of Banking Union. Its aim is to create conditions that will help banks not to accumulate large amount of national debt.
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СЛАЙД 11
To summarize, we can say that Europe has a chance to get out of crisis but it won’t be a fast process. If bankrupt countries will continue to devalue the life of their people, then maybe in a few years they will be able to aligned imbalances.
If we talk about Russia, we can’t say that the European crisis had a negative impact on attracting external liabilities of banking system but the impact on the individual segments of the market (interbank lending) was significant. Moreover a number of subsidiaries of European banks left Russian market.