The European banking sector is solid, eurozone finance ministers insisted Thursday, despite market nervousness that has driven shares down.
European shares slumped to a more than two-and-half-year low Thursday, in part due to concerns about the banking sector's exposure to energy companies following the plunge in oil prices.
Top EU officials and eurozone finance ministers meeting in Brussels Thursday downplayed the worries, arguing that their lenders have been shored up by the creation of a eurozone banking union that includes a common supervisor and a joint scheme to wind down troubled banks.
"I believe that in the eurozone, structurally, we're in a much better place than we were some years ago and that also goes for our banks," Dutch Finance Minister Jeroen Dijsselbloem, who heads the panel of European finance ministers known as Eurogroup, told journalists in the Belgian capital.
"We should be pretty relaxed about the situation at this particular moment," Finnish Finance Minister Alexander Stubb added. "I'm not worried."
German Finance Minister Wolfgang Schaeuble said he thought some of the volatility was due to "market exaggeration."
"The European banking system is much, much more solid than in the past," EU Economy Commissioner Pierre Moscovici added. "My motto today is clear: trust, trust in the solidity of our economy."
But the eurozone banking union is still missing its third leg - a deposit insurance scheme that is being ferociously opposed by Germany out of fear that it would have to pay for banking crises in other nations.
Italian Finance Minister Pier Carlo Padoan, whose country's banks have been at the forefront of stock market turmoil, called for the eurozone Thursday to "mutualize risk-sharing," meaning to agree on joint insurance of bank deposits.
"The response to systemic turbulence must be systemic, it cannot be [dealt with] just on a case-by-case basis," Padoan told the Politico news website. "If we are convinced about building up a union, then we must share something."
His statements came one day after the Italian government passed reforms intended to shore up its banking sector. Markets are worried about an accumulation of bad loans by Italian banks and their exposure to national sovereign debt.
The banking package includes tax breaks for bankruptcy auctions - supposed to make it easier for banks to recover money from insolvent customers - and a reform of cooperative banks. The government also introduced a so-called bad-bank scheme agreed in January with the European Commission to help lenders get rid of bad loans.
But international forces are also at play, including a slowdown in China and other emerging markets.
"There are systemic movements not only in Europe, but in Asia and the United States that are affecting the banking sector in particular, related to the global growth outlook which is starting to be less encouraging than some months ago," Padoan noted in Brussels.