Middle-East Investors Unlikely to Play White Knight Again for European Banks – Wall Street Journal

by John Letzing and Simon Clark

For ailing banks during the global financial crisis, sovereign-wealth funds and other investors from the oil-rich Middle East often played the white knight.

As Europe’s banks come under mounting pressure now and their shares slump, these deep-pocketed investors are unlikely to ride to their rescue again if capital is needed.

At this point, it is unclear who could take their place.

In 2008, as the crisis brewed, oil prices were reaching new highs. Global banks, in need of billions of dollars in new investment, saw an opportunity…

…In addition, there is a political risk for sovereign-wealth funds seen propping up big banks with large investments, according to Patrick Schena, an adjunct professor at the Fletcher School of Law and Diplomacy at Tufts University.

“There is a very fine line between being an investor of last resort and being involved in a rescue or bailout,” Mr. Schena said.

Read the full article in The Wall Street Journal (subscription required)

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