European banks can weather market turmoil, says S&P
By Michele Maatouk
Date: Tuesday 21 Mar 2023
(Sharecast News) - European banks can weather the recent market turmoil, according to Standard & Poor's.
The ratings agency noted that following the rescue of Credit Suisse by UBS, investors are asking whether a lack of market confidence could cause contagion in the European banking sector.
"The answer is no," S&P said on Tuesday. "We maintain our view that, overall, European banks benefit in the rising interest rate environment. This remains our base case," said credit analyst Giles Edwards.
"As we said last week, rated European banks do not exhibit a combination of large unrealized losses on securities portfolios and highly confidence-sensitive funding models. Furthermore, we see the business and risk management deficiencies that led to Credit Suisse's takeover by UBS as quite unique in nature and scope relative to the European banking sector."
Nevertheless, S&P said it remains mindful that the "seismic shift" in monetary policy will be a game changer for parts of the financial sector.
"We expect the market turmoil will take time to recede as investors come to realize that the macroeconomic environment brings nuanced but far from dire consequences for European banks, and that the banking sector remains solid."
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