Fitch Ratings says the combined effect of the European Central Bank’s longer-term lending program and continued deleveraging should allow the European banking industry to cope with its high level of debt maturities in 2012.
Funding requirements in 2013 and beyond, however, remain a concern for Fitch Ratings as banks exposed to weaker eurozone economies will have to find a way to wean themselves off central-bank support.
While the three-year lending programmes help limit funding concerns for 2012, they also increase the sector’s reliance on the ECB. This raises questions around how banks can restore confidence among investors and wean themselves off central-bank support in 2013 and beyond.
We believe that many banks will choose to attempt to continue with their deleveraging – however their ability to sell assets is likely to be significantly restricted because so many other lenders will be taking the same steps.
Banks will also take advantage of any shifting investor demand by issuing either secured or unsecured debt whenever they see an opportunity in the market. The string of issues in the last few days has shown that the strongest European banks are still able to issue unsecured debt in the public market, but this is now only the case for a smaller number of banks.
Excerpted from Fitch: ECB Helps Backstop 2012 Funding; 2013 Concerns Remain
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