US Banks Are Fine, Worry About The EU: Bernanke
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Federal Reserve chairman Ben Bernanke has told Congress that American banks are able to withstand financial shocks from Europe despite the US banking system’s high exposure to Europe.
Testifying on Capitol Hill alongside Treasury Secretary Timothy Geitner, Bernanke sought to allay fears from policymakers of the need for another U.S. financial system bailout, should the European debt crisis spiral out of control.
Bernanke said the recent stress tests conducted by the Fed found that U.S. banks are able to weather another recession.
Federal Reserve chairman Ben Bernanke has told Congress that American banks are able to withstand financial shocks from Europe despite the US banking system’s high exposure to Europe.
Testifying on Capitol Hill alongside Treasury Secretary Timothy Geitner, Bernanke sought to allay fears from policymakers of the need for another U.S. financial system bailout, should the European debt crisis spiral out of control.
Bernanke said the recent stress tests conducted by the Fed found that U.S. banks are able to weather another recession.
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He said:
[quote] In the past few months, financial stresses in Europe have lessened, which has contributed to an improved tone of financial markets around the world, including in the United States … Although a blow up in Europe would be very costly to the American economy, I think we are in much better shape to meet those challenges than we were a few years ago. [/quote]At the same time, Bernanke called on European leaders to do more to address the region’s economic problems.
Calling on Europe to ‘increase economic growth and competitiveness and to reduce external imbalances in the troubled countries’, Bernanke added:
[quote] More needs to be done. Full resolution of the crisis will require further strengthening of the European banking system. [/quote]
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American banks, in general, have little exposure to the core of the eurozone meltdown, namely in Southern Europe.
Still, Bernanke is calling for European leaders to do more to equalise the trade and economic differences between the North and the South, rather than tackle the debt crisis alone.
American banks, he said, are exposed to ‘material risks’ in the eurozone core, where 35 percent of U.S. money market funds are parked and remain ‘structurally vulnerable’.
When asked if the Fed would invest in Europe’s sovereign debt, Bernanke told Congress it was not an option because foreign debt purchases are meant to ‘maintain foreign exchange reserves’.
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