EU Leaders Reassure Markets After Sharp Drop in Bank Shares on Friday

European Union leaders are attempting to reassure markets after a sharp drop in bank shares on Friday. The fall was triggered by fears of weaknesses in the global financial system and the collapse of two US banks.

German Chancellor Olaf Scholz said the EU banking sector was “resilient” with strong capital and liquidity positions. Dutch Prime Minister Mark Rutte added that regulations were now much improved, playing down fears of a new banking crisis in the EU.

Shares in Deutsche Bank, Germany’s largest lender, fell sharply on Friday, dragging down major European banks. This followed a steep rise in the cost of financial derivatives, known as credit default swaps, that insure bondholders against the bank defaulting on its debts.

The EU Council of Heads of State and Government issued a statement after a summit in Brussels, saying the banking sector was resilient. This was in response to a hastily arranged marriage between two banks on Sunday, which was aimed at stemming the upheaval in the global financial system.

The rise in costs of insuring debt was also a prelude to a government-backed takeover of Swiss lender Credit Suisse by its rival UBS. EU leaders are continuing to monitor the situation and reassure markets that the banking sector is stable.