Facts, not fear, should shape our view of Europe’s banks

After the collapse of Silicon Valley Bank and Credit Suisse drama, some investors are understandably asking if we’re on the brink of another 2008-style banking crisis. I’ve had an entire career in politics and government since that crash. Hard lessons have been learned and there can be no complacency – so often, trouble comes from areas we don’t expect. But we should also be careful not to ignore some of the key differences and underlying strengths in the current situation. Unfounded panics can become self-fulfilling. If we allow that, everyone other than a few lucky speculators will stand to lose out.

Credit Suisse was not typical: it had been an outlier for months. The rest of Europe’s banking sector is fundamentally strong: as shown by key indicators for capital, liquidity, profitability and asset quality. So why have their shares slumped? It’s down to sentiment. Buyers of financial securities have had their confidence knocked in the last two weeks and short sellers (investors that bet the price of a stock will go down) have tried to take advantage of this, with things stoked by social media.