Fitch Ratings’ latest quarterly European fixed income investor survey, representing the views of managers of an estimated US$7.1 trillion of fixed income assets, shows the very strong linkage that investors perceive between the eurozone’s banking system and its political unity.
“Half of all respondents said that only a resolution of the eurozone crisis will make banks investable again,” said Monica Insoll, managing director in Fitch’s credit market research group. “High profile initiatives – such as increased capital, clarity on resolution legislation and imposing limits on assets for debt collateralisation – will not alone address this issue.”
A further 36% said a eurozone crisis resolution and the other specific measures would all be necessary.
Only 10% of investors surveyed believed that increased capital would restore banks’ credit status and attractiveness to fixed income investors. Even fewer – just 3% – said clarity on resolution legislation, including bail-ins and depositor preference, would suffice. No respondents thought imposing limits on the proportion of assets that can be used to collateralise secured debt would be enough.
The reduced concerns regarding banks’ funding options are also translating into increased investor appetite for the asset class as survey respondents voted banks their second most favoured investment choice. Notwithstanding the over-arching concerns about the impact of the eurozone crisis, an all-time-high of 27% of participants said banks were their most favoured investment choice, closely behind the top choice, industrial corporates, with 28% of votes.
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