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Nia Williams

August 10, 2012

Tony Ward is chief executive of Home Funding

 

It was the Goldman Sachs analysis this week that caught my eye. It highlighted recent lending activity across regions.

 

No surprises then that banks across Europe have reined in cross border lending given 1) the amount of regulation that they now have to contend with and 2) suspicions that the euro may implode in the future.

 

So unsurprisingly you have national supervisors compelling local banks to build up capital and liquidity at the expense of other EU countries.

 

As one regulatory source has said: “As the crisis has deepened there has been a rationale for national regulators to make sure their own country is ok.”

 

So a case of batten down the hatches then. Not great considering we are all part of the global market and what impacts in one country usually has a much wider knock-on effect internationally.

 

I suspect this comes down to confidence as banks in Northern Europe appear to be curbing their exposure to Mediterranean countries for fear that their loans will be repaid in reintroduced national currencies.

 

Understandable but given we live in a globalised economy we cannot afford to take this unilateral ‘I’m alright Jack’ approach.

 

There has to be a balance between regulatory controls and a common sense attitude to cross border lending. Otherwise the markets will grind to a halt and it could go horribly wrong for us all.


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