Europe's banks are sound despite the confidence blow from a US subprime crisis, said the head of the European Central Bank today, while the US Federal Reserve chief in a German speech made no mention of the crisis but underscored American reliance on foreign finance.
The US housing finance debacle, which resulted from massive lending to underqualified home buyers, has echoed through global financial markets where investors had snapped up the securities packaged from the loans.
European Central Bank chief Jean-Claude Trichet said "the credit losses were not significant enough to materially impact the soundness of core financial institutions."
He told the Eurosystem of euro zone central banks had shown its capacity to react quickly and effectively to the challenges it had faced since the beginning of August when the crisis first surfaced.
Federal Reserve Chairman Bernanke, in Berlin, did not discuss the outlook for the US economy or interest rates.
Addressing the topic of global imbalances, the Fed chief reiterated his view that huge external debts were not unduly burdening the US economy now, but that over time the US current account gap is unsustainable.
"The large US current account deficit cannot persist indefinitely because the ability of the United States to make debt service payments and the willingness of foreigners to hold U.S. assets in their portfolios are both limited," he said in aspeech at the Brandenburgische Akademie der Wissenschaften.