ECB watchdog sees no Europe contagion after US, Swiss bank rescues

The European Central Bank’s (ECB) financial watchdogs have determined that the recent rescue of a handful of US and Swiss banks has not resulted in any contagion across the continent.

The ECB’s Banking Supervision Board (BSB) has concluded that the bailouts of a number of US and Swiss banks, including Citigroup and UBS, have had no discernible impact on the European banking system.

The BSB’s assessment comes on the heels of a series of bailouts orchestrated by American and Swiss authorities in order to forestall a systemic collapse of the global financial system. The rescues included a $45 billion injection of capital into Citigroup and a $60 billion bailout of UBS.

The BSB’s analysis found that, while the US and Swiss interventions had created some contagion in global markets, the effects were limited to those countries and did not affect the European banking sector. The BSB concluded that the direct financial exposure of European banks to the two banks in question was negligible, and that the indirect exposure through derivatives and other instruments was also limited.

The BSB also found that the rescues had not led to any material changes in the level of risk in the European banking system, nor had they led to any significant increase in the cost of funding for European banks.

Overall, the BSB concluded that the US and Swiss bailouts had not caused any contagion in the European banking sector, and that the system remains resilient and well-capitalized.