While banks now have very strong liquidity positions, they will have to pay back loans from central banks, he said. "We need to make sure that they remain with sufficient so-called high quality liquid assets," said Campa, a former senior official at Spain's Santander bank. Banks should pass on rises in interest rates to depositors given the ease with which they move their money to another bank online, which caused problems at Silicon Valley Bank, Campa said. "The banks will have to be very prudent in how they price, and be active in how they keep their depositors," Campa said.
There has been some worry about "unrealised" losses in bond portfolios of banks, also a factor in the collapse of Silicon Valley Bank. "American banks have about 20% of their balance sheet in fixed income portfolios. EU banks only have 11.3%. We are asking supervisors to monitor," Campa said.
CDS MARKET A "CONCERN"
The market for credit default swaps (CDS) is now an "area of
concern" for regulators after sharp volatility in CDS for
Deutsche Bank, Campa said.
"We are really trying to understand from that episode what
are the interlinkages of those markets. I think all authorities
are assessing this," Campa said.
EU securities watchdog ESMA is also looking at the CDS
markets, and the derivatives industry says regulators already
have data on the market.
"We need to understand how these markets are working, how
liquid they are, and how easy it is for small quantities of
positions to really move prices," Campa said.
There is no evidence, however, that recent banking turmoil
shows the need for a rethink in banking rules, Campa said.
"The global consensus is that we should implement the rules
that were approved after the global financial crisis," Campa
said.
"What we have learned so far in the last two weeks is that
the rules have helped rather than hurt."
The EU is due to update its framework for closing failing
big banks to include medium sized lenders.
"I think that's good. I encourage them to go in that
direction," Campa said.
Critics say Credit Suisse's takeover showed that
post-financial crisis rules to end "too big to fail" banks and
avoid public help have not worked.
"I think the Credit Suisse event shows that resolving a
large systemic bank is always going to be difficult. I don't
think we can ever be 100% comfortable. We have made a lot of
progress, but it was always going to be difficult."
(Reporting by Huw Jones
Editing by Tomasz Janowski)
