European banks face forex volatility on bail-in ratios

Use of funding in foreign currencies creates new risk, especially in non-eurozone countries

European banks raising bail-in debt under new European Union rules are struggling to find fixes for the potential foreign exchange volatility that could arise when funding and risk-weighted assets are denominated in different currencies. The problem is especially acute for banks whose domestic currency funding market – such as Poland, Sweden or the UK – is not as deep as the eurozone or dollar markets.

“The forex volatility issue is a pain,” says Julie Galbo, chief risk officer at Nordea in