Europe’s financial problems aren’t confined to Greece and a reorganization of the continent’s banking system is necessary, Laurence D. Fink, chief executive officer of BlackRock Inc., said in a Bloomberg television interview today.
“The European problem is way beyond Greece,” Fink said in the interview in Hong Kong. “Greece is the most immediate problem. I find it very difficult to restructure Greece without the understanding that we’re probably going to have to restructure Ireland and restructure Portugal.”
Inspectors from the EU, International Monetary Fund and European Central Bank are set to wrap up a review of Greece’s progress in meeting the terms of last year’s 110 billion-euro ($157 billion) bailout in coming days. The EU will then formulate its plan for further aid to Greece, which remains shut out of financial markets a year after the rescue package.
Many smaller banks in Europe will need to be recapitalized, said Fink. The largest banks on the continent are well capitalized, though devaluation of some of the sovereign credit will put stress on them, he added.
“The banking system in Europe owns all this debt,” Fink said. “If we restructure one country, we’re now basically putting huge capital stress on these banks. Before we restructure any country, we’re going to have to restructure the banking system in Europe.”
Europe is going to need a “giant TARP,” Fink said, referring to the Troubled Asset Relief Program that the U.S. introduced to rescue financial firms. BlackRock advised the Federal Reserve on illiquid debt portfolios during the height of the financial crisis.
Fink, one of the co-founders of BlackRock which began as a fixed-income firm in 1988, said he’s more bullish on U.S. equities than bonds.
Fink, 58, has built the firm into the world’s biggest asset manager through acquisitions including the purchase in December 2009 of Barclays Global Investors. The $15.2 billion deal, the largest for BlackRock, added passive funds such as ETFs to BlackRock’s active stock and bond strategies.
BlackRock manages about $3.65 trillion in assets in its stock, bond and hedge funds, as well as its iShares exchange-traded funds. The firm’s BlackRock Solutions unit advises financial institutions and governments around the world on hard-to-value assets. BlackRock this year was picked by the Central Bank of Ireland to advise on the assets held by six of the nation’s largest banks.
In 2005, BlackRock bought State Street Research & Management to add more stock, real estate and hedge funds. In 2006, it expanded its equity business with the purchase of Merrill Lynch & Co.’s money-management unit. In 2008, BlackRock acquired a division of Quellos Group LLC to add hedge-fund assets. The purchase of BGI, the biggest seller of index-tracking ETFs, was the largest to bring together active and passive funds.