As the European debt crisis continues, the banking sector within the region is in dire straits. The exchange traded fund (ETF) tied to the European financial system iShares MSCI Europe Financials Sector Index Fund (NYSEArca: EUFN) is down about 5% today and has lost nearly 10% in the past month.
“It is very important that the (bailout fund), which has been enhanced in terms of its flexibility, achieves its effective lending capacity and the ability to use this flexibility as soon as possible,”Jose Vinals, director of the IMF’s Monetary and Capital Markets Department, said. [Euro Financial ETF Takes on Additional Losses as IMF Sounds Alarm]
“There is not enough transparency in the way banks treat sovereign risk,” Vinals said, on Reuters.
European banking shares have pared large losses on speculation of a Greek default over the past few weeks. Many European banks have a lot of exposure to Greece’s debt, namely France and Spain. [European Financial ETF Down 33% in 2011]
Investors are anticipating the outcome of the meeting of the Group of 20 major economies and the International Monetary Fund this week. The pressure will be intense for the leaders of the Eurozone economies to implement tighter policy. [France ETF Shakes off Moody’s Downgrade]
Risk exposure to banks in the region is at 300 billion euros, and the need for recapitalization looms for banks to be able to weather any further risk.
Tisha Guerrero contributed to this article.
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