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Banks in crisis: are they learning from the mistakes of the past?
Banks do not learn from the 2008 financial crisis: competitive disadvantages, Basel 3 rules and the Credit Suisse crisis in 2023.
Banks in crisis: are they learning from the mistakes of the past?
The banking sector is once again at the center of discussion after European banks should have gained deeper insight into their risk management and capital requirements following the 2008 financial crisis. How Süddeutsche.de reports, banks criticize that the rules to prevent a financial crisis are too strict. These challenges are further compounded by the decision to postpone the implementation of the Basel 3 capital rules in the EU until January 2026.
The banks' main argument is that they feel disadvantaged in competition with the US. A study by Oliver Wyman, commissioned by the European Banking Association, shows that higher capital requirements in Europe lead to higher borrowing costs. This debate is underpinned by the ECB's report, which has yet to be revised, which finds that requirements for European banks are more stringent than in the US.
Internal conflicts and criticism of the industry
The banking associations emphasize that the European system is more complex and lobbyists use this complexity to their advantage. The economist Martin Hellwig is critical of the banks' debt and the inadequate implementation of reforms since 2008. Another aspect that is enlivening the discussion is the takeover of Credit Suisse by UBS in 2023 in order to forestall possible insolvency.
The problems at Credit Suisse highlight the risks that exist in the banking sector. It experienced a dramatic collapse in March 2023 after its situation was exacerbated by falling stock prices and high volatility. How Morningstar reports, Credit Suisse's share price fell from 96 Swiss francs in April 2007 to just 0.8 Swiss francs at the time of its takeover by UBS.
Regulators intervened after the bank was rocked by multiple scandals and a lack of trust in management. For 2022, the bank recorded a massive outflow of deposits, which was reinforced by rumors about the instability of the institution. In the fourth quarter of 2022, 138 billion Swiss francs were withdrawn, which exceeded the bank's liquidity reserves.