European banking ‘in generally poor shape’

The eurozone has still not agreed on a banking resolution regime that will solve the looming crisis in the region, according to economist Colm McCarthy.

So far the focus of a eurozone banking union has been on designing a single supervisory mechanism, but this on its own is inadequate to deal with problems in the financial sector.

Speaking at the Conference on Irish Economic Policy held in Dublin yesterday, Mr McCarthy said the European banking system “was in generally poor shape.” Banks across the eurozone had a collective balance sheet of €33.9 trillion, which was 357% of GDP. In the US, banks had a balance sheet of €8.6trn, which was 78% of GDP, and in Japan the corresponding figures were €7.1trn, which was 174% of GDP.