Europe’s Dying Bank Model
The good news for Europe is that it will not reenact the dramatic collapse of Lehman Brothers, thanks to the ECB’s unlimited ability to provide liquidity. But European leaders have yet to recognize that old bank business models are obsolete, and that reliance on private-sector leverage for repairing banks' balance sheets is doomed to failure.
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LONDON – The good news for Europe is that it will not reenact the dramatic collapse of Lehman Brothers. The European Central Bank’s unlimited ability to provide liquidity ensures that. But European leaders have yet to recognize that old bank business models are obsolete, and that reliance on private-sector leverage for balance-sheet repair of both sovereigns and banks is doomed to failure.