Second credit crunch awaits, warns SEB head Falkengren
Annika Falkengren, group chief executive of Swedish bank SEB, warns that the new 9% capitalisation requirement could lead to a period of drought in the credit market.
The deal agreed overnight means banks that cannot raise the necessary capital from shareholders have the option of approaching public sources of money.
However, the €106bn that the EBA has estimated the banking sector will require means that there is a risk some banks simply decide to restrict lending as an easier option. That in turn would hit access to credit and make it more difficult for companies to invest going forward, according to comments from Falkengren carried in Dagens Industri.
She warned that with banks accounting for 85% of credit supply in Europe, if they are pressed to improve their headline numbers it could not only affect that supply, but possibly force more banks to be nationalised and increase the burden of lending onto those nationalised banks.
Another side effect seen from the new capitalisation requirement is the withdrawal from Nordic markets of foreign banks. That in turn will reduce competition, affecting pricing. While big multinational companies will be able to borrow on international markets, such a development would hit small and medium sized enterprises in the region, Falkengren added.