Sunday, September 4, 2011

European bank run continues: comments by ABN Amro's CEO

With the solvency of European banks in doubt, liquidity continues to disappear from the credit markets.

A Bloomberg article quotes the Chief Executive of ABN Amro as saying that interbank liquidity is disappearing because of solvency concerns.
Banks are seeking to retain their liquidity, making interbank lending more difficult, as funding from money and capital markets becomes harder to obtain, ABN Amro Group NV Chief Executive Officer Gerrit Zalm said.

Interbank borrowing for more than six months is also becoming problematic because banks are reluctant to lend to competitors with “big positions in weaker countries’ debt, for instance,” he said today on Dutch television program “Buitenhof.” ABN Amro is “well-capitalized,” he said....
There’s no need at present to increase the European Financial Stability Facility to calm financial markets as long as government leaders show sufficient willingness to expand the rescue fund should that need arise, he said. 
A demise of the euro would have “catastrophic” consequences for the Dutch economy, which sends about three- fourths of its exports to other euro-zone states, and “would cause a recession that would make the 1930s a trifle by comparison,” Zalm said.

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