ECB's Ewald Nowotny says banking sector not facing crisis but in transitional phase

Ewald Nowotny, a governing council member of the European Central Bank (ECB) has dismissed speculation that Europe was facing a new banking crisis similar to that seen in 2007 and 2008.

However Nowotny conceded that financial institutions in the bloc were in a "transitional and learning phase."

Speaking to Reuters before an event hosted by the Friedrich Ebert Stiftung Foundation, he said: "I wouldn't overdramatise it."

He told the news wire that financial institutions would have to learn to deal with the new requirements, adding that the changes made sense and were moving in the right direction.

Nowotny, who is also the governor of the Austrian central bank, declined to comment specifically on Deutsche Bank. Shares in Germany's largest bank hit a record low amid concerns over its stability, after the US Department of Justice (DoJ) slapped a $14bn fine on the bank for mis-selling mortgage-backed securities.

Speaking at the event, he said that it was important to consider all the consequences before letting any financial institution go bankrupt. Such decisions always triggered concerns about other financial institutions, he added.

On the Basel III banking rules, which are set to be completed by the end of 2016, which would see banks facing higher capital requirements, Nowotny said that central bankers were still divided. However, he did say that banks could sell their assets as the fastest way to raise capital to meet the new requirement.

The rules, which are aimed at strengthening the global banking system after the 2008 financial crisis, will see banks having to hold on to more and different types of capital.

Deutsche Bank's troubles not similar to Lehman Brothers

Meanwhile, Austrian Finance Minister Hans Joerg Schelling dismissed links to Deutsche Bank's current problems to the troubles faced by Lehman Brothers but said that regional lenders were facing a broader profitability crisis.

"After the financial crisis, we haven't quite worked through the banking issues ... but what I am very convinced of is that we don't have a banking crisis, we have a profitability crisis in our banks," he told Reuters.

He warned: "Cost-income ratios are too high, the margins are very bad due to the very dramatic interest rate situation — the banks will have to tackle those challenges and reorganise."

Although he said that Deutsche bank is not up for discussion at the upcoming European finance ministers' meeting, he cautioned that no one had thought the collapse of Lehman Brothers, the fourth largest investment bank in the US, could have triggered "such a catastrophic avalanche."