By Simon Miller
Europe’s bill for bailing out banks cost over €2,000bn (£1,709bn) according to Joaquín Almunia, the vice-president of the European Commission responsible for competition policy.
Speaking at the Strategies for Savings Banks and Landesbanken conference in Berlin today, Almunia said that between 2008 and 2009 EU member states spent around €2.34trn keeping their financial systems afloat.
In 2009 the cost came to €1,107bn with €827bn in guarantees on bank liabilities, €141bn in capital injections and €110bn on the relief of impaired assets. The bill for liquidity and bank funding support came to €29bn.
“The governments of the EU have had to commit large amounts of money to keep the financial system afloat and avoid the worst for the economy,” Almunia commented.
He continued: “Thanks to this unprecedented effort, Europe’s governments have averted the meltdown, but this does not mean that we can go back to the status quo before the recession.”
With the three authorities on insurance and occupational pensions, banking and securities, as well as the European Systemic Risk Board, introduced last month, the vice-president said that the crisis had “also showed that banks need both a strong capital base and sustainable funding sources to retain the confidence of the markets”.
He added: “In this regard, more sustainable business models for banks will be encouraged by the new prudential rules with capital requirements that will insulate banks form future shocks and liquidity ratios that will steer them towards more stable funding sources.”
Alumnia reminded delegates of the proposed regulation to force the clearing of standard derivatives which “should prevent excessive risk-taking and abuse” and warned that “the deregulation era is over”.
He added: “These reforms will restore confidence in the financial markets and among depositors and will better prepare us to deal with market failures in the future. And in the event of a new crisis, the reforms will help ensure that its cost will not fall only on taxpayers.”