Any decline in European sovereign confidence may worsen the balance sheet of the financial system.When market attention is focused on the Bank of America (27.69, -0.02, -0.07%), and European banks are also dangerous changes.
According to data from the European Central Bank, as of the five months of March this year, the reserved households took more than 200 billion euros from banks from the euro zone. In February, the capital outflow reached 68 billion euros of record, and 62 billion euros were out of March.
At the same time, European credit is also tightening.
The European Central Bank pointed out in the latest loan survey last week that since this year, the credit standards of euro zone enterprises, households and real estate loans are tightening."" ".
The demand for corporate loans has declined as the fastest since the 2008 financial crisis.The demand for loans from families has also declined, and the decline is slightly lower than the unprecedented speed in the previous quarter.
Although analysts once again stated that the US banking crisis has nothing to do with Europe, but industry insiders warn that the risks facing Europe and the United States are different in structural. Once the European banks have crisis, the time required for recovery may be possibleMore than the United States -just like the European debt crisis around 2010.
Sovereign risk -the biggest risk of European Bank?
The biggest risk of European banks is not to escape from deposits, but to be directly but hidden with the risk of sovereignty.
Capital according to European Capital Requirements (Capital
Requirements Directive (CRD) stipulates that government bonds are considered to be zero -risk assets and can allocate a 0%risk weight.
This means that banks do not have to prepare capital for government bonds, but they also increase the possibility of bank exposure to sovereignty risks: if the European government's credit is damaged, the value value of European banks may decline sharply, resulting in banks' assets.
On the other hand, European banks are large -scale or convertible bonds (contingent
Convertible Hybrid Bond, COCO debt) is a risk and unstable tool.
Under certain conditions (such as a major loss of banks), COCO debts can be automatically converted into ordinary shares, so they are usually considered a way to supplement capital, because they can make banks not seek government assistance when they suffer losses.
However, during this year's CITIC Bank crisis, AT1 bonds, one of the COCO bonds, were directly reserved to 0, causing a large amount of losses of creditors, and also set a precedent for the loss of creditor's rights.
This case also shows the risk of the COCO debt: when the bank encounters a risk incident, it will have a negative Domino brand effect on the bank.
In addition, Lacalle has more evidence -the European Central Bank data shows that since 2020, the euro zone bank's exposure to domestic sovereign bonds has increased significantly:
The total asset ratio of Bank of Italian investment in domestic sovereign debt securities has increased to 11.9%.
During the period of excess currency, these risks are insignificant, but any decline in European sovereign confidence may worsen the balance sheet of the financial system.
