ΠΟΙΟΙ ΑΠΟΡΡΟΦΟΥΝ ΤΙΣ ΤΙΜΕΣ
- 30 Apr 2023
- economy
European banks have strength as well as a strong capital base and liquidity, the supervisory arm of the European Central Bank, SSM, assured a while ago in a joint statement they issued with the Single Resolution Board, yesterday after the decisions taken on the bailout of Credit Suisse.
As they state, the resolution framework applied in the European Union has incorporated the reforms recommended by the Financial Stability Board after the Great Financial Crisis. This, among other things, provides that the burden of the resolution of a troubled bank must be borne by its shareholders and creditors.
In particular, common equity securities are the first to absorb losses and only after their full use will the impairment of AT 1 bonds (Additional Tier 1 bonds) be required.
This approach has been applied consistently in previous cases and will continue to guide the banking supervision actions of the SRB and the ECB in crisis interventions.
Additional Tier 1 is underlined in the announcement, is and will remain an important element of the capital structure of European banks.
Bonds rise, yields fall after Credit Suisse bailout
The bond market has reacted positively since the morning after yesterday's announcement of the rescue plan of the Swiss Bank Credit Suisse.
Investors are turning to government bonds, which are a safe haven, causing their prices to move up and their yields to fall.
It is indicative that in the domestic secondary market the yield on the 10-year bond ranged a little while ago at 4.05%, from 4.19% on Friday.
The yields of most Eurozone bonds also move accordingly, with that of the 10-year German bond falling to 2.06%.
In particular, as far as Greek bonds are concerned, today's rise is partly due to the upward revision of the Greek economy's prospects, which was carried out by Moody's rating agency on Friday.
It is recalled that Moody's kept Greece's credit rating unchanged at Ba3. However, he reviewed the prospects of the Greek economy as positive.
The main driver for the outlook change to 'positive' is the forecast for a period of higher nominal GDP growth than in the past decade, partly as a result of improved governance and earlier financial and banking sector reforms that yield more clearly bearing fruit, Moody's reports.
These developments combined with higher nominal GDP growth will contribute to a significant reduction of the country's debt in the coming years, according to Moody's.
Specifically, Moody's expects that in the coming years the growth of Greece's real GDP will be supported by investments, both through European Union funds and private investments. Together with the effects of previous reforms - which help create an improved business environment - and ongoing structural reforms, including improving the efficiency of the public sector and justice, this is likely to raise potential growth to 2% to 3% the next five years.
