Posted on June 7, 2008 by

Is Risk Management Weaker in European Banks than US rivals?

Under the headline ‘European banks harder squeezed by credit crunch than US rivals‘ this story provides some insights into the relative losses suffered by European and US banks. It also raises a question about European Risk management practices. 

Given the apparent success of US banks and brokers selling subprime securities to Europe, it raises the question: are European risk management practices weaker than those in the US? Or were the US relatively lucky? Or is it too early to say?

 

European banks have now suffered considerably more losses because of the credit crunch than their US rivals, even though the turmoil was first triggered by problems in the US subprime mortgage market.

Of the $387bn in credit losses that global banks have reported since the start of 2007, $200bn was suffered by European groups and $166bn by US banks, according to data from the Institute of International Finance, a Washington-based banking group. 

The pattern appears to have arisen because the success of US banks and brokers in selling packages of subprime securities and other linked instruments to European groups in recent years. 

Full story on the FT