ECB's Weber sees signs of improvement in markets
Friday April 25 2008
``Over the past weeks, the nature of the disruptions has slightly changed,'' Weber, who is also head of the Bundesbank, said at a conference in Eltville, Germany today. ``While there are ongoing tensions on the interbank money market, share markets, for example, are noticeably firmer since mid-March.''
The world's largest banks and securities firms, buffeted by the collapse of the U.S. subprime mortgage market, have reported about $290 billion in credit losses and asset writedowns since the start of last year. The International Monetary Fund said April 21 that European financial institutions may ``need to own up'' to about $43 billion more losses following the U.S. housing slump.
``Confidence among market participants remains considerably distorted,'' Weber said. ``In order to re-establish a minimum of trust, more transparency on still-existing risks and possible value adjustments is needed.''
In an effort to spur lending between banks, the ECB has made extra liquidity available for periods of up to six months. The Bank of England plans to swap 50 billion pounds ($99 billion) of government bonds for mortgage securities, while the U.S. Federal Reserve has lowered the overnight lending rate between banks by 3 percentage points since September.
Highest Level
Still, the cost of borrowing in euros for three months climbed to 4.85 percent today, the highest level since Dec. 18, according to the European Banking Federation. The rate has risen 48 basis points in the past two months.
``We're having to deal with a very serious financial-market crisis,'' German Finance Minister Peer Steinbrueck told lawmakers in Berlin today. ``It is to be expected that economic developments will cloud over in Germany and the European economies.''
Germany's DAX benchmark index has gained 5.2 percent over the past month, paring losses to 15 percent this year. By comparison, the Dow Jones Euro STOXX 50 Index has shed 14 percent this year and the U.S. Nasdaq Composite Index is down 5.4 percent.
Credit Suisse Group, Switzerland's second-largest bank, yesterday reported its first loss in almost five years on 5.3 billion Swiss francs ($5.1 billion) of writedowns linked to deteriorating credit markets. Rival UBS AG, Switzerland's largest bank by assets, the same day announced job cuts at the securities unit.
The Frankfurt-based ECB has kept its key rate at 4 percent since June last year to assess the impact of market turmoil on the economy. ECB President Jean-Claude Trichet said yesterday that the current rate level will help achieve price stability.
- Bloomberg
- Simone Meier
