Hefty US bank fines threaten financial stability: EU


Eurogroup chief Jeroen Dijsselbloem said Friday that repeated US fines on European banks were eroding the stability of the European finance system.

With Deutsche Bank now trying to negotiate down a threatened $14 billion fine from the US Department of Justice, Dijsselbloem said there is a limit to what should be done in punishing weakened banks for past misdeeds.

“In the last couple of years, if you add up all the fines that the American authorities have put on European banks, it takes away a lot of the new capital that European banks have pulled in,” he told CNBC television in an interview.

“I think it’s becoming a risk and I think we should discuss it.”

Since the financial crisis, European Banks have worked hard to raise capital in markets to strengthen their foundations, he said.

“We’re in the process of strengthening our banks,” he added.

“And here comes the American authority that says, ‘Oh, you collected new capital, we’ll take that out as a fine.'”

“Don’t get me wrong,” he said. “If Deutsche (Bank) has been involved in all kinds of scandals, they need to take their sanctions. But they need to be fair and effective. And the last thing we want is for fines to threaten financial stability of the European banking sector.”

The EU authorities had also increased fines on banks for breaking regulations, Dijsselbloem said.

However, he added, “there is a limit to what you should and could do in relation to financial stability, and as soon as you come close to that, you’re overstating things.”

The threatened fine against Deutsche Bank — for having marketed high-risk mortgage bonds as safe investments before the 2008 financial crisis — raised worries that the German government would have to bail it out.

But sources told AFP last week that the fine will probably amount to around $5.4 billion, close to what Deutsche Bank has already set aside for its looming legal costs.

© 2016 AFP

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