ECB chair Draghi defends banking stability

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European Central Bank president Mario Draghi has defended the stability of Europe’s banks following a sharp drop in lenders’ share prices last week.

Speaking at a hearing of European Parliament’s Economic and Monetary Affairs committee, Draghi said banks are in a “very different” situation to the financial crisis and that regulation has paved the way for a more stable system.

He said: “We have to acknowledge that the regulatory overhaul since the start of the crisis has laid the foundations for durably increasing the resilience not only of individual institutions but also of the financial system as a whole.”

In particular, Draghi pointed to the fact that banks have higher and better-quality capital buffers, have reduced their leverage and have improved their funding.

He addressed last week’s falls in bank stocks, saying: “The fall in bank equity prices was amplified by perceptions that banks may have to do more to adjust their business models to the lower growth/lower interest rate environment and to the strengthened international regulatory framework that has been put in place since the crisis.”

Separately, Draghi also addressed the issues surrounding the UK’s potential exit from the European Union, saying that any deal needs to be beneficial for the EU and the UK.

According to the Financial Times, he said any discussions around Brexit need to protect the EU’s single market and monetary union.

“We had and continue having great benefits from the single market so we should protect it. It’s pretty clear that further integration of our monetary union is essential. These are the two guidelines for the ECB’s views on what should be negotiated.”