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Banking on Belgium's banks

Banking on Belgium's banks
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How safe are Europe’s banks? Not very, if the new head of the International Monetary Fund Christine Largarde is to be believed. She has called for a recapitalisation otherwise the fear is many would be swept away in another credit crunch.

In Belgium, the bank Dexia is especially exposed to billions of euros of Greek debt.

But on the streets of Brussels are savers really that nervous?

‘‘Yes, and not only Dexia. I think as a customer of banks that invest, which put their eggs in other entities, other countries. I think savers and clients are scared,’‘ said one bank customer.

Others, however, are less concerned. ‘‘There’s a lot of talk in the media about this debt crisis in Greece, Portugal and Spain, but honestly, for myself personally I don’t really feel worried,’‘ another man said.

Belgium’s other big banks, like KBC, are also causing jitters in the financial markets. It is heavily exposed to loans in Ireland.

But Michel Vermaeke from Belgium’s Financial Federation insisted the Belgian banking system remains solid: “For the investor, there is nothing to worry about. Since 2008 we’ve reinforced the system. We’ve strengthened the capital base of banks. In addition, savers are protected up to 100,000 euros. The question is can the euro overcome the problems of government debt and will this be followed by convincing and concrete action?’‘

So why did the IMF’s new chief recently demand an urgent recapitalisation of Europe’s banking sector?

Etienne de Callataÿ, Chief Economist at Degroof Bank believes she would not have made such a call without good reason.

‘‘When someone like Christine Lagarde comes out with such a strong warning, it must by true. Actually, I think European banks are weak and would benefit from being recapitalised,’‘ de Callataÿ told euronews.

While most of Europe’s banks recently passed stress tests, the IMF is thought to want an extra 200 billion euros pumped into the system.