Portuguese bank collapses
The collapse of Banco Espirito Santo has raised fears there could be other nasty surprises lurking in Europe's banking sector.
Portugal's largest lender, Banco Espirito Santo (BES), has collapsed amid a series of sudden and unforeseen losses. A fortnight ago, regulators appeared convinced that the bank was solvent. Now they are to use €5bn left over from the country's international bail-out fund to patch up the huge hole in BES' balance sheet.
Meanwhile, Italy fell in to recession, with GDP shrinking by 0.25% in the second quarter, following a 0.1% decline in the first.
What the commentators said
The worry now is that more nasty surprises could be lurking in Europe's banking sector. Unlike its US and the UK counterparts, Europe hasn't forced troubled banks to come clean about their losses and recapitalise, which is one reason lending has been so subdued, said Paul Taylor on Reuters.com.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Now the European Central Bank is conducting a review of bank assets and appears to have helped highlight problems at BES. So what else might it sniff out?
"The spotlight is likely to shine on the eurozone periphery," said Ben Chu inThe Independent. Banks in Italy,Portugal and Spain had the highestnon-performing loan ratios in 2012.
The International Monetary Fund thinks those states' banks face around €250bn of potential losses in the next two years, and only Spain's banking system has enough cash to cover this.
So investors may need to stump up again and if they won't, governments could have to step in. The fear of bankrupt banks bankrupting governments, a hallmark of the euro crisis, could soon return.
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.
After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.
His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.
Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.
-
Bitcoin price one of the most-asked questions on Alexa - here's how to buy the cryptocurrency
According to figures from Amazon, which cover September 2023 to November 2024, pop star Taylor Swift and Bitcoin were named among the most popular Alexa queries of 2024
By Chris Newlands Published
-
Investing for children this Christmas – five ideas
It might not come with a shiny ribbon, but an investment fund could be the gift that keeps on giving. We share five ideas if you are investing for children this Christmas.
By Katie Williams Published