The Faro office building at Banco Santander SA headquarters on Thursday, February 2, 2023.

Bloomberg | Bloomberg | Getty Images

European banks look stronger and more attractive than their US counterparts on many measures, according to officials and analysts speaking at the Institute of International Finance conference in Brussels this week, adding that regulation and cooperation are still needed to boost growth in the region.

The biggest bank in the US is worth what the nine or ten European banks are because of weaker growth and less profitability since the 2008 financial crisis, Ana Botín, executive chairman of Spain’s Santander Group, told CNBC at the event on Tuesday.

But the top European banks have better levels of credit default swaps, a form of insurance for a company’s bondholders against default, “which means fixed-income investors believe the risk of our debt is lower than the top banks in the United States,” Botín added.

The recent volatility which led to the sale of Credit Suisse to UBS were not evidence of a systemic banking crisis, she said, but rather mismanagement and liquidity problems at specific banks.

“We have a very strong position in terms of capital, liquidity monitoring, protection of our customers’ data. But we also need a bit more capacity to support growth so we can be more profitable,” she said.

“What we need is a fundamental rethinking of what we want the banks to be in the new economy in a world that needs growth. And finding that balance is really important between being cautious, we’re not saying we should go back on that , but also to be able to finance growth,” Botín continued, adding that this would be a key theme at the IIF’s conference.

European banks are “safer, stronger, cheaper” than American ones, said Davide Serra, chief executive of Algebris Investments, who highlighted the higher liquidity ratio of European banks – about 160% – compared to 120% in the US

“In a way, banks in the United States have optimized their deposit base more. And now that the Fed (Federal Reserve) is holding interest rates higher, people just want to get paid for their deposits. So they have options with money markets, or with moving money around,” he said .

Santander's Botín: This is not a banking crisis

“At the same time in the US, people are being reminded that, you know, not all banks are created equal. And just because you have a sign called bank, you’re not as safe as, you know, JPMorgan or Morgan Stanley.”

It will lead to further consolidation in the US, he said, after that series of regional bank collapses this year, with banks considered safe benefiting.

“Overall, I think the opportunity is clear. For the strong banks in Europe and in the US, with Europe much, much more attractive, there has been zero outflow of deposits, zero issuance … And so, to be honest, after 10 years of restructuring, I think Europe is the right place to be.”

Bank union delay

European banks safer, stronger than their American counterparts, says the CEO of the asset management company

“There is one thing that we could do in Europe to get higher growth, which is securitization,” she said.

Creating new rules for securitization, the creation of marketable securities from a pool of assets – which remains a contentious topic after the subprime mortgage crisis – is key to the EU’s proposed Capital Markets Union.

“The securitization market in Europe is 6% of the size of the US market. Banks are no longer the best credit holders,” Botín said.

“In many cases we can create, we can help our clients raise that capital and then place it with other funds and other parties that are better holders. So there are a number of things around, say, the Capital Markets Union that could go faster and help with higher growth,” Botín said.

[pub1]