Germany will not accept a Common Deposit Guarantee Fund being set up in Europe until the risk associated with the banks’ balance sheets is reduced.
Amongst other measures, it is proposing that the banks have less exposure to public debt, an asset which they definitely do not consider as risk-free.
Although the negotiations are still at a preliminary stage, Sabadell experts consider that: “Germany’s stance could compromise the solvency of some financial institutions, especially those which are more exposed to peripheral countries’ bonds (the domestic banks in Spain, above all, although the Italian banks’ exposure is higher.)
The President of the ECB Supervisory Council, Daniele Nouy, passed on a request from a Euro MP to the ECB President, asking for capital consumption of sovereign debt to be assigned to the European banking sector. Mario Draghi replied that this is an issue which should be tackled from a global perspective, forcing a global solution, and for the time being an agreement is still far off.