banksSlowly, painfully slowly, a plan seems to be coming together to save the Eurozone. Wolfgang Münchau, writing in The Financial Times, says he has never seen European leaders looking so scared. And they have good reason to be scared; Robert Peston, the BBC’s Business editor, argues that:

Unless the banks are fixed, there will remain too big a risk that a financial crisis could turn the current global economic slowdown into something more akin to depression than recession.

Europe’s banks, then, are under fire. The expected plan to rescue them (along with the rest of the Eurozone) would involve three steps. First, quadrupling the “firepower” available to the EU’s “bail-out fund” – the European Financial Stability Facility (EFSF) – from the current 440 billion euros to a figure closer to 2 trillion euros. Second, the shoring-up of Europe’s banks through recapitalisation measures.

These first two steps would be necessary to prepare Europe for what would come next, because the third step would be a Greek default – with a predicted haircut (i.e. write-down on loans) of up to 50% for investors. This would send shock-waves through the global financial system similar to those caused by the collapse of Lehman brothers in 2008 – which is why it’s important to make sure Europe’s banks are ready for what might be coming.

BNP Paribas S.A. is the second largest banking group in the world, with headquarters in both London and Paris. We spoke to Christian Lajoie, Head of BNP Paribas Group Prudential Affairs, and asked him what the situation was like in Europe’s banking sector. Are things as bad as reported?

I would say no. Because, from what we know – and this is the case also for a lot of banks – normally banks should be compliant with the new Basil III reforms… And we will be. Even in June, we already had a relatively high level of capitalisation, and you can see a very big improvement in terms of the capitalisation of French banks. So, you already have a big increase, and we are on the way to be compliant with the Basil III requirements.

What is being said, however, is that everyone would like to accelerate that compliance, and expects banks to comply with requirements by 2013 that were originally planned to be in effect only by 2018. And this is a little bit more difficult to achieve… In the present market it’s almost impossible to raise equity, especially for the banking sector.

For Mr. Lajoie, the problem is more about politics and market psychology than with any underlying weakness in the banking sector:

I’m very worried by the global pessimism of the market and of people when there isn’t really much reason to be so. What we need is time… Obviously, we need time because people cannot suddenly go from a relatively lenient policy to a strict one. We need to keep some growth, and this growth will not be possible if we apply harsh measures too quickly. What we need is political will, expressed clearly, commonly and with no doubt about the willingness to really implement what is being said.

What do YOU think? It seems likely that Greece is heading towards a default. Is this a good idea? Will it calm the markets and end the crisis, or are we heading towards an even bigger storm? Let us know in the form below, and we’ll take your ideas to experts and policy-makers to respond.

IMAGE CREDITS: CC / Flickr – Attribution-ShareAlike – kenteegardin

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  1. Christos Mouzeviris

    So, let a country default, in order to save money and the global economy…For who..?? Why it has to be always about those “private investors” and their interests..?? Who are they? How can the Markets decide the future of a nations and its future generations? What about the people of Greece or Europe..?? Who serves THEIR interests?

    You are elected Ladies and Gentlemen to serve the common good, to serve the interests of your voters and your nation. It is a great honor and a great responsibility to decide what is best (well supposedly) for those who pay you to represent them.They pay you= they employ you, you work for them!

    From what we see though, our Governments are working for those “private investors”, financial groups and multinationals. They play the fortunes of the voters in the Markets just like in a casino, and instead of trying to give them a better future and secure a better deal for them, they obey the rules of the Banks..Why?

    I remember we used to be able to have an account in a Bank, to keep safe our savings..The Bank was paying us interest in order to use our money..They paid us for the privilege of using our money..Now days, it is us who pay them to have a hold of our money.They charge us for “services”..They got too powerful, too strong and they do not give a care in the world about their customers, unless they are billionaires..

    Time to go back to the basics then? Time to start controlling the Banks and the Markets? Time to reschedule and redesign the Capitalist system? Time to start showing some respect to our people and nations? We are talking about people here, future generations, nations with history, living beings..And you are playing with their fortunes and make deals behind their backs, for the interests of those “private investors”..?? Are you serious?

    Delete all debts of all indebted nations, as those debts were created via the IMF by cunning plots..Reboot our economies and let those “private investors” and the Markets lose their money..Do not push those nations to repay those loans, as you will only push them deeper into debt. There is no way out of them. Greece was betrayed by its political elite, that made deals with third parties :other nations, (European and non-European- the “super-powers”) private investors, the Markets, the Banks..All for the profit and domination..Greece has many natural resources and the only way for some to get a hold of them for nothing was for Greece to go bankrupt.

    Exactly what had happened in Africa and Latin America..And the European leaders are allowing this to happen in Europe as well..? Have you got no shame? The Greek political elite above all! If you do not represent the people who vote for you, perhaps it is time for you to leave the country, change your nationality and serve those who pay you anyway- the Multinationals.

    What to do with the Greek debt? Erase it, or shove it where the sun does not shine! It is not the fault of the people who got too much debt. How dare Mr Pangalos of Greece, and Mr Ahern put the blame of the ordinary people of Greece and Ireland, point the finger on them for the current situation! When you bombard them with advertisements every day, everywhere they stand, promote this consumerist and capitalist model of keep buying and keep wanting to support the Markets, when you have the banks going literally after them to give them loans for nothing…: loans for holidays, loans for a new car, loans for botox or whatever else! When you encourage them to live in debt, to keep buying, to have a credit card, keep spending! Because that is how the Capitalist system works. And then you point the finger at them?

    While you were doing exactly the same as a Government? All European states borrowed massively and excessively , in a way doing what their citizens were doing..Living beyond their means. Who now blames our Governments for wasting our money and resources, and selling them off to the Markets?

    Greece is not the only country with massive debt, most of Europe is in the same boat, yet the Greeks are called upon to save the day, by paying up the bill and saving the euro and the European economy!Just because we are small and insignificant enough to be bullied! European leaders should get a grip and a reality check..The pot is boiling. If it spills, you may get a 3rd degree burn! We went too far with Capitalism. We need to go back to the basics.

    Everybody is accusing and mocking Greece for being a corrupt country, and its people lazy! How dare you! The Greeks are among the hardest working people in Europe, yet they are getting payed less than their European counterparts, for doing the same job and using the same currency! We need to have equal salaries for all members of the euro-zone, since we are paying the same prices for a loaf of bread and a bottle of milk, don’t you think? It is the German pensioners flooding Europe each summer, have you seen large groups of Greek pensioners roaming Europe? No! Why? Simply because they have no money! Give the Greeks the pensions of the Germans and the we will be talking about unity, equality and partnership or “the European family”..Until then this is a load of rubbish!

    The rich elite was tax evading In Greece with the tolerance and cooperation of each Government, yet now it is the ordinary citizen that comes to pay the bill with a vicious austerity plan. That leads no where. I can never understand how you want to save one country’s economy, while stripping all money from the people, thus starving its market, and investing nothing in creating jobs. Not only that but you plan on firing many public sector employees, thus more people unemployed, less money in the market, and more social welfare to be payed. Hello? I can run the country better than you!

    Greece is gripped by an oligarchy (now that I am thinking of it, actually most of Europe is in the same boat) that has ruled the country with folly for the past few decades. The Greek people of the over 50′s generation simply they do not know any better! They have been through so much deprivation, two World wars, a civil war, and Asia Minor disaster, a junta (all of them caused or supported by the European powers and America) that they grew up in ignorance and an unstable political landscape.

    When you had to be either with one side or you would be prosecuted, when even when you wrote with a red pen you were jailed or interrogated simply because you were considered a communist, imagine the fear the Greek public had for expressing their complains in a democratic way. They have learned to contact their traditional political party MP (that is the way it works since the civil war) only to ask for a position for your son or daughter for the Public Sector, because this sector is the only hope for a secure jobs and career, since nothing else is being developed in the country.

    That led to a political stagnate. But now that the younger generation (my generation of between 30-40) that has been educated, has studied abroad, has traveled and has interests and an opinion in their country’s politics, are about to take part in politics, they are pushed to more deprivation by this economic collapse. They can not get a job, they have to emigrate, or if they get a job they get paid whenever their employer wants, or he/she can, whatever salary he is willing to give to them. All worker’s rights that have been won by decades of fighting in Greece and elsewhere, have been lost. So will they take part in Greece’s political life, since they have no job, they can’t get a job and they fear of losing the one they have?

    They are being driven into a new occupation, a new junta only that this is a financial this time. And Europe’s leaders are allowing this to happen! Shame on you! But especially on Greece’s leaders! You do not want to see this country prosper, you want to exploit it! Well you have another thing coming your way! If we are talking about equality and a United Europe, that means for all nations, not just Germany and a few other Northern States? Ok? Either you put this into your little head or let’s leave this project, because I am not willing to be treated as a second class citizen anymore.

    I want factories, industries, education, investments, prosperity and progress, equal opportunities and my Northern European “co-EU-citizens”! Opportunities to study and follow the subject of my studies in my country or anywhere in EU,equal salaries and social benefits. Instead of waiting for the Multinationals to come and invest in our countries, while we have to jump when they tell us to jump in order to invest, why don’t we create a fund for investments for Europeans, by Europeans? Let my taxes go for research and growth, in all EU countries, not to pay the fat cats! Can you do that?

    • Joe

      Yes, it is about those private investors, because their investments and deposits are being used to hedgte bad government debt. European Government debts are what have beet giving the entire world flu symptoms for the past 18 months.

      If you don’t pay those bond buyers back what they were promised when they purchased those bonds, or make good on deposits, they will never trust governments again. They took money that they’ve earned and paid taxes on, and given them to central banks on the promise of payment of interest, only to see not only that interest, but their principal threatened.

      That “fat cat” you look to demonize are retirees and people who did the responsible thing and set aside a part of their earnings in savings.

  2. Christos Mouzeviris

    Rubbish..And who has so much money to lend to a whole nation..?? Billions of them..?? “Fair and hard earned taxed money” my backside! There is only one way that you make so much money and that is being dishonest and abusing other people..
    Who are those people anyway, and what are their interests? we should not get lends from them anymore, that is the whole point..Let them put their money wherever they have a gap to fill.See what they do with them…

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