Europe's banks 'far from out of the woods' - ZEW

Tuesday 16 February 2016 16.38
There has been an increase in the cost of insuring the risk of Deutsche Bank - whose share value dropped 13% early last week
There has been an increase in the cost of insuring the risk of Deutsche Bank - whose share value dropped 13% early last week

The Head of International Finance at the Centre for European Economic Research in Germany (ZEW) has said Europe's banks are "far from out of the woods when it comes to the euro zone crisis", as highlighted by volatility in Deutsche Bank's share price in the past week.

It follows the publication of a ZEW study showing the mood among German analysts and investors has worsened due to concerns about the global economy.. 

Speaking to RTÉ News, Sasha Steffen said that usually a decline in the banking sector is associated with issues in the real sector, but "particularly in Europe where there are so many companies bank dependent and not capital-market financed".

He added confidence in the banking sector has worsened and there has been an increase in the cost of insuring the risk of Deutsche Bank - whose share value dropped 13% early last week.

Mr Steffen said risks across the German economy were increasing at the same time "so you can still see how important these large banks are for an economy and this 'too big to fail' issue is still with us and probably will be for some time".

He said structural issues in the banking sector that have not been dealt with before are beginning to resurface, adding that "even though I don't want to compare this to a 'Lehman Moment', I think we're still far from out of the woods when it comes to the euro zone crisis".