«The crisis was born outside the eurozone. With us, a Svb case cannot exist»- Corriere.it
«Europe has the necessary tools to deal with a banking crisis that comes from outside and which, given the rules in force in the Eurozone, would not have found the ground to develop in Italy. There BCE is ready to provide all the necessary liquidity to the financial system of the eurozone but it will have to find a balance between the reassurance of the markets and the measures to fight theinflation, a battle that certainly is not over. These are the evaluations of Lorenzo Bini Smaghi — banker and economist who from June 2005 to the end of December 2011 was a member of the executive committee of the European Central Bank — in the face of the new banking crisis triggered by the bankruptcy of the US Silicon Valley Bank.
What are the causes of the crisis related to the management of individual banks?
«Any banking difficulty generally concerns the specific business model, unsuitable for coping with sudden changes in the markets. In the SVB case there was a concentration of large deposits, poor diversification of assets, an asset-liability mismatch in maturities and poor governance at best. It is surprising that the American regulator has not been more careful».
Are there "systemic" reasons in this crisis linked to the very long period of very low or even zero interest rates?
«Low interest rates were justified by low inflation and weak growth in the pre-covid years. Conditions have changed and require a different monetary policy. This type of change generally puts stress on the financial system, which is the transmission link of monetary policy. For this reason it is essential to have careful vigilance. More could have been expected from the US, which seems to have ignored the risks inherent in medium-sized banks".
What impact will there be on the eurozone banking system?
«It is paradoxical that Europe is hit in this way by crises that arise from banks located outside its area of supervision. The European system has been greatly strengthened since 2014 with the creation of the single supervisory system and does not involve those specific vulnerabilities present in the United States. However, the European system has not been completed. In particular, there is a lack of an integrated deposit insurance system and a single capital market. This is a factor of fragility for Europe".
What role will the ECB play in preventing a spillover from these external banking crises and a fall in confidence in the financial system?
"The ECB has all the tools available to intervene and provide liquidity to the European banking system".
The markets have reacted violently to the banking crises of recent days, with waves of panic selling on the main stock exchanges...
«When events of this type happen, everyone tries to understand what the next situation of fragility is. And the reaction, in particular that of the large American funds, which also manage European savings, is to look to the past, when Europe was fragile. But now, thanks to the measures implemented since 2014, Europe is stronger than the United States. It thus happens that when faced with a domestic problem, US funds react by selling assets abroad and this is a paradox».
What will be the impact of this crisis on the decisions of the ECB regarding the increase of interest rates?
«The ECB cannot fail to take this into account, because this stress on the markets produces a monetary restriction. Raising 50 basis points, as if nothing had happened, would be risky. At the very least, the ECB must reassure that it is willing to intervene to provide all the liquidity needed by the system. On the other hand, it can't even risk giving the impression that the fight against inflation is over.'