Wild rumour of European bank with no problems
On Wednesday, the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve and the Swiss National Bank announced coordinated actions to enhance liquidity support to the global financial system by lowering the pricing on their temporary US dollar liquidity swap arrangements by 50 basis points to the dollar overnight index swap rate plus 50bp.
Markets immediately took their cue. Such coordinated action must mean that at least one, perhaps more large European banks were on the verge of collapse earlier this week. Rumours instantly swirled: was it a French, Spanish or Italian bank that had to be pulled back from the brink?
Dutifully, Euromoney hits the phones to check out the rumours and try to find which bank could be teetering. However, to us, it seems like an issue of semantics. Most of the European banks are on the brink, aren’t they? It’s only the ECB loosening its standards on eligible collateral that is keeping large swathes of the European banking industry from toppling over.
Euromoney talks to a source working on UniCredit’s rights issue. “No, no, no, there is no problem for any large Italian bank, unless there’s a problem with the sovereign.” He pauses to reflect and then adds: “Of course... there is a problem with the sovereign.”