European Banker CEOs Say "US-Originated Banking Crisis Is Over"

WSJ 'CEO Council Summit' Event

European bank CEOs have assessed that the banking crisis originating from the US has completely subsided. However, they foresee that business restructuring in the banking industry will be inevitable due to deteriorating funds caused by changes in the operating environment, such as high interest rates and tightened credit conditions.

At the 'CEO Council Summit' hosted by the Wall Street Journal (WSJ) held in London, UK, on the 24th (local time), European bank CEOs evaluated that the global financial system crisis triggered by US regional banks has ended. This outlook contrasts with previous warnings that the sharp decline in commercial real estate prices would become a weak link causing the loan assets of US banks to become severely vulnerable.

They predicted that the core of the banking crisis is not a 'bank crisis' but rather 'interest rate risk and book value evaluation,' making business restructuring of banks unavoidable. Colm Kelleher, Chairman of UBS, which acquired Credit Suisse (CS) after it was forced into bankruptcy following the banking crisis, stated at the event, "The systemic crisis is over (it's over)."

He added, "Many other banks do not have asset problems as severe as Silicon Valley Bank (SVB) or First Republic Bank, which triggered the banking crisis," but forecasted, "However, they will adjust their portfolios and reduce loans to resolve the issues revealed by this crisis." Venkata Krishnan, CEO of Barclays, also said, "The urgent crisis has passed," but "many banks may still need to change their business models, including reducing loans."

It is analyzed that a major overhaul of existing business models will be inevitable to avoid headwinds caused by macro changes such as tighter credit conditions and to respond to the decline in the value of held assets like government bonds. The WSJ reported that restructuring will be unavoidable given that benchmark interest rate hikes are still ongoing in major countries including the UK, Europe, and the US.

Colm Kelleher, Chairman of UBS. [Photo by AP News]

Janet Yellen, US Treasury Secretary, who participated in the event via video, drew a line on the possibility of additional mergers among US banks following the banking crisis. In response to questions about further mergers in the banking industry after JP Morgan's acquisition of First Republic, she indicated that additional mergers are unlikely, stating, "It is important to maintain a healthy mix of large, medium, and regional banks to preserve the diversity of the banking landscape."

Criticism has been raised that the bailout measures for too-big-to-fail banks after the banking crisis once again exposed the limitations of the US financial system. The WSJ pointed out that small banks provide financial services to industries and regions not supported by large banks, emphasizing the need to maintain them to preserve ecosystem diversity.

Meanwhile, Secretary Yellen reaffirmed her stance regarding the US federal government's debt ceiling crisis, warning that a default could occur in early next month. She said, "It is difficult to say exactly when (available cash) will be depleted," but maintained the existing position that early June is the default deadline.

Amid recent speculation that spending adjustments might allow the government to hold out until mid-June, Secretary Yellen reiterated the 'early June' deadline. She also warned, "US Treasury securities are the foundation of the global financial system," and if the US fails to pay principal and interest on its Treasury bonds on time, the resulting shockwaves will spread worldwide.

This content was produced with the assistance of AI translation services.