51. Strong Governments, Weak Banks
- Author:
- Paul De Grauwe and Yuemei Ji
- Publication Date:
- 11-2013
- Content Type:
- Policy Brief
- Institution:
- Centre for European Policy Studies (CEPS)
- Abstract:
- One of the more troublesome features of banks is that they still hold so little equity. In 2013 the capital and reserves of EU banks amounted to only 7.6% of total balance sheets. Well-run businesses outside the banking sector typically hold equity shares of 20%, 30% or more of their balances sheets. For good reasons; these well-run firms know that shocks can occur that could wipe out large parts of their balance sheets. Good business strategy thus leads these firms to hold sufficiently large buffers to avoid bankruptcy.
- Topic:
- Debt, Economics, and Monetary Policy
- Political Geography:
- Europe