Will Europe's banks be 'safe' by 2015?
Europe's economic outlook has started to improve, but concerns still remain about the state of the EU's banks.
Although senior figures within the European Central Bank (ECB) have refuted claims that deflation is a serious threat to the eurozone economy, the organisation decided not to raise its record-low benchmark interest rate from 0.25 per cent during its most recent meeting at the start of February 2014. This has caused financial analysts to speculate about the strength of the euro area's recent recovery.
Are EU banks "safe and sound"?
In January 2014, Dutch Finance Minister Jeroen Dijsselbloem told Bloomberg Television: "At the end of the year we will know that all the banks are sound and safe again."
He added that banks are already dealing with their problems and are doing all they can to strengthen their balance sheets.
"They're not waiting for the actions of the ECB. Banks are going ahead and getting their act together, which will help strengthen the economic recovery in the eurozone," he was quoted as saying.
Will Mr Dijsselbloem's predictions turn out to be correct? It is important to assess recent developments and future proposals before reaching a conclusion.
Banking union plans: Are they flawed?
European Commission leaders have confirmed plans for an EU banking union, which will give regulators more powers to deal with failing financial institutions. It is hoped the introduction of a Single Resolution Mechanism will make it easier for senior eurozone figures to monitor the progress of banks across all member states.
While the theory behind this idea has been largely welcomed, many financial industry experts have raised questions about the practicality of the banking union. Speaking to Bloomberg, Christian Clausen, President of the European Banking Federation, suggested regulators' current proposals for creating common universal standards across the EU are misguided.
He thinks plans to harmonise banking regulations across borders do not take the individual needs of each country into account.
"If you have different realities, then either you need to create the same reality - i.e. Sweden gets to look like Italy or Germany - or you make a rule that fits the reality," Mr Clausen was quoted as saying.
"You can ask yourself whether we in Sweden want the same financial system as they have in Italy, or in Germany, or in France? Probably not."
Are European banks still overstretching themselves?
The recent banking crises in Greece and Spain, among others, were well documented, but could these high-profile financial meltdowns be repeated?
Although banking chiefs are keen to avoid mistakes that were made in the past, it seems many organisations are in a vulnerable position. According to Reuters, European banks have loaned more than $3 trillion to emerging markets, with Erste Bank, HSBC, BBVA, Standard Chartered, UniCredit and Santander said to be the most prolific lenders.
This total is four times the amount that has been borrowed from US banks, which means European banks are in far bigger danger if the economies in Turkey, Russia, Brazil and South Africa start to struggle.
Matt Spick, analyst at Deutsche Bank, told the news provider: "We think emerging markets shocks are a real concern for 2014. When currency (volatility) combines with revenue slowdowns and rising bad debts, we see compounding threats to the exposed banks."
Conclusion: Will Europe's banks be "safe and sound" by the start of 2015?
While Mr Dijsselbloem claims that Europe's banking system will be relatively healthy by the end of 2014, there is plenty of evidence to suggest this may be wishful thinking.
Although it is encouraging to see banks becoming more confident when lending money to businesses, it seems some have not learned from the mistakes that led to the most recent financial industry collapse. A huge amount of European money has been lent to up and coming companies in emerging markets and while this could prove to be a successful move, it is a big gamble.
It is also apparent that European regulators are committed to easing the strain on the continent's banking infrastructure, but many analysts think some of the laws and agreements that have been put in place so far could do more harm than good.