European Banking System Faces Turmoil Due to Risk Spillover from US Financial Markets

"The overlapped systemic financial risk and lack of trust jointly fueled the banking crisis in Europe," noted Yan Li, a senior lecturer at Nanyang Business School of Singapore's Nanyang Technological University, adding that such a situation may see the European banking industry and economy face hard times in the future.

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Photo taken on April 4, 2023 shows a building of Credit Suisse in Geneva, Switzerland. (Xinhua/Lian Yi)

A lack of independent financial policies and oversight has put the European banking industry in turmoil due to spillover risks from the U.S. financial system, a Singaporean economist told Xinhua in a recent interview.

The crisis that happened to Credit Suisse and Deutsche Bank reflected how fragile some European banks were when depending excessively on an international financial system dominated by U.S. dollars, said Yan Li, a senior lecturer at Nanyang Business School of Singapore’s Nanyang Technological University.

“The overlapped systemic financial risk and lack of trust jointly fueled the banking crisis in Europe,” Yan noted, adding that such a situation may see the European banking industry and economy face hard times in the future.

“The United States may slow down interest rate hikes, but will not cease. Therefore, the European banking industry will face growing systemic risks,” said the economist.

However, Yan said that the current banking crisis in some European countries and the United States is unlikely to deteriorate into another global financial crisis similar to what happened in 2008.

“The collapse of the banking industry and even the financial system in Europe and the United States is unbearable, so relevant governments will do their best to stop the crisis from spreading,” he said.

In Europe, Credit Suisse, the second largest bank in Switzerland, was taken over by Swiss banking giant UBS due to a liquidity crisis and market volatility. Also in March, the share prices of Germany’s biggest lender Deutsche Bank plunged amid growing concern about the health of European banks.  

Xinhua News Agency

Founded in 1931, Xinhua News Agency is one of the largest news organizations in the world, with over 10,000 employees across the globe. As the main source of news and information for China, Xinhua plays a key role in shaping the country's media landscape and communicating its perspectives to the world. The agency produces a wide range of content, including text news articles, photos, videos, and social media posts, in both Chinese and English, and its reports are widely used by media organizations around the world. Xinhua also operates several international bureaus, including in key capitals like Washington, D.C., Moscow, and London, to provide in-depth coverage of global events.

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