The diversity of financial markets

Talking of diversity of views and strange conversations, I was in discussion with an American bank the other day and they asked me if Europe would survive this crisis. I thought they meant Brexit, and started waffling on about whiff-whaff and Boris Johnston but no, they stopped me mid-sentence and said the banking crisis. Banking crisis? What banking crisis? The one in Europe, they said. It’s top of mind for their economists within the bank.

I then realised they probably meant the German banks Deutsche and Commerz, the sick dogs of Europe. So, I started to say that this was yet another hiccup on the long road from the global financial crisis and Europe’s sovereign debt crisis, and the big German banks did not represent all of Europe, but just Germany.

No, they said, we think it’s worse than that. You’ve got Greece, Italy and Spain still unsecured, a big money laundering hole developing in the Nordics, the German banks sinking and no credible investment bank in Europe at all. What’s going on?

Hmmm, yes, what’s going on. Maybe we need a bit of fiscal healing. So, I googled Europe bank crisis and found a whole load of articles giving the view of the rest of the world of what’s happening over here.

Euromoney had a good piece published this week:

European banks are trying to put a devastating series of money laundering scandals behind them, but the crisis is far from over. The extra costs it implies are hitting them at the worst possible time, while the damage to their reputations will be even harder to repair.

Money laundering exposures seem to be endemic in Europe’s banks.

CNBC reports that the STOXX Europe Banks index, which measures the state of banks investability here, is at an all-time low.

Fears of slowing economic growth, negative rates, and geopolitical uncertainty in Italy and the U.K. have ravaged the Stoxx Europe banks index, pulling it down to a support level touched in 2011 and in 2016. It had not broken below that support since the financial crisis lows.

Quartz talk about the weakness of Europe’s banks and how the big American banks are taking over the turf:

It’s been a decade since the global financial crisis and the truly big, global banks still standing are, for the most part, American. Europe’s lenders in particular are still struggling to find their feet, and it doesn’t help that US rivals are steadily encroaching on their turf.

IPE outlines the challenges that will face the proposed new head of the European Central Bank, Christine Lagarde:

European banks are not looking good, with Deutsche Bank’s miseries being the most high-profile. Indeed, it has been a bad decade for European financials, with share prices still a fraction of their pre-crisis highs.

And Lagarde herself will face a grilling this week in the European Parliament, before being confirmed in the job through for the next eight years (it's a shoe-in).

Challenging times. Tough times. Oh, how nice it must feel to be an American.