In addition to restoring the health of the banking sector, the faults of the financial system must be fixed. “We need to put in place a new and more effective supervisory framework”, Marco Buti stated.
The report remarks that some very early signs of improvement have been visible in the past few weeks. The report presents an assessment of the effectiveness of the banking support measures taken by Member States since autumn 2008.
The measures have provided financial institutions with substantial public resources, mainly in the form of:
- Capital injections have allowed banks' capital to stabilise despite large asset write-downs.
- State guarantees on securities issues have been a significant bank support measure in all Member States.
- State-guaranteed issues have increased considerably without signs of crowding out of non-guaranteed issuance.
- Net issuance of debt securities by banks has returned to pre-crisis levels.
The report reveals that bank balance sheets are still fragile and there is considerable uncertainty about the capacity of many banks to absorb losses linked to assets that may become impaired as the effects of the economic down-cycle feed through. Therefore a consistent and co-ordinated strategy is needed to fully restore investor confidence.
© European Commission
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