MEPs on Tuesday quizzed the EU’s top bank supervisors on the possible implications of the Silicon Valley Bank’s failure for financial stability in Europe.
During a hearing in the Economic and monetary affairs committee, MEPs quizzed José Manuel Campa, Chair of the European Banking Authority (EBA), and with Andrea Enria, Chair of the Supervisory Board of the ECB, asking primarily how the new environment of high interest rates was going to impact the EU banking sector and whether EU banks were being stress tested sufficiently for this new environment.
They also asked for an assessment of the level of risk of contagion, and whether other sectors of the EU’s economy were at risk such as the technology sector or the housing sector, and how fallouts in these sectors could affect banks. MEPs also asked whether the level of unsecured deposits in EU banks was cause for concern and whether there were any lessons to be learnt from the US authorities’ decision to guarantee deposits far beyond deposit guarantee in the EU. Many MEPs insisted on the need to introduce the European deposit and insurance scheme and complete the banking and capital markets unions.
Reminding that that SVB was not subject to Basel II requirements, some MEPs suggested that had it been treated as a systemic bank, its collapse would not have happened. They asked whether the EU should deviate in any way from the Basel standards and introduce longer transitional periods for its banking sector.
In his remarks, Mr Enria said that there was not much concern about contagion of EU banks because their business model was not similar to that of SVB. He added that EU authorities had already made banks aware of the need to be more defensive with regard to high interest rates risk, and that the EU banking sector remained resilien.
Mr Campa said that the affected US banks had very little exposure to the EU banking sector. Notwithstanding this, it was true that care needed to be applied by all banks in managing the new environment, he added. He also said that the current stress tests being undertaken on a selection of EU banks, was testing the reaction to high inflation and high interest rates.
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