Health of European Banks Points to Bleak Outlook

August 20 00:00 2011

New York, August 20 ( – Global economic recovery is facing a bleak outlook with European banks immersed in government debt and struggling to survive. American financial firms that deal with European companies are feeling the heat due to the shaky position of European banks and large scale dumping of stocks by investors. They are finding it difficult to raise money because of Europe’s sluggish economy and the precarious condition of its financial firms.

American financial firms are being pressurized to charge more for loans to European customers and businesses. European banking sector is facing a bleak outlook in view of the spiraling debt crisis and stunted economic growth. Even in Germany, which was considered to be the prime mover of Europe’s economy, there is hardly any growth. According to Matt Spick, an analyst with Deutsche Bank, the bleak outlook of Europe’s banks along with the economic slowdown is leading to a “toxic funding crisis” that might force financial firms to tone down lending because of the paucity of funds.

As a result of this bleak outlook, bank stocks continued to fall on Friday although the losses were steeper on Thursday. Societe Generale slumped 16 percent in two days, BNP Paribas lost 11 percent, Credit Agricole was down 9 percent, and Deutsche Bank went down 7.5 percent in two days. Britain’s RBS lost 16 percent during this period.