Summary
There is no need to show too much problems in EU banking system especially when elections will soon take place. On the other hand, the opposition always tries to reveal problems.The solution would be to do a check on a case by case basis.
Analysis
Apart from the big bailouts there the situation is broadly like this:
1. On investment banks, it depends on what markets they played their ABS or other derivatives (Latin America, US or Asia usually).Latin America is in trouble, Asia is on upturn still. US, you know better! If they had a stake on Central and Easter Europe+ Russia, then the recuperation time is also fast. The rumors would not stand from this point of view, I guess. It could be a pusher for some German banks' share prices. If they put in the market bad news, prises go might down and the guys who sold before (or want to buy now), can buy back their shares at cheaper prices. But, this may be just a simple speculation.
2. If you look at their commercial banking side, it depends on: how well they refinanced their business and what degree of writeoffs they still have (this is the part no one actually knows exact figures). Still no problem, though as now refinancing is reaping at cheaper costs (1%),new business is growing slower though, as they sit on the bailout cash for now to see new regulation changes on capital requirements. (if any changes are imposed soon?)
Pending trouble could be if they made mistakes in both areas and are exposed to deals in those industries and markets most affected by this crisis.
3. If their gov. wants to make disappear more funds into bank bailouts, than they would not show directly a nasty picture of their banking system not to discourage investors/electorate and general clientele. The worse they can do is to pick up only on some singular banks, that they will know how to make it look in big distress.
1. On investment banks, it depends on what markets they played their ABS or other derivatives (Latin America, US or Asia usually).Latin America is in trouble, Asia is on upturn still. US, you know better! If they had a stake on Central and Easter Europe+ Russia, then the recuperation time is also fast. The rumors would not stand from this point of view, I guess. It could be a pusher for some German banks' share prices. If they put in the market bad news, prises go might down and the guys who sold before (or want to buy now), can buy back their shares at cheaper prices. But, this may be just a simple speculation.
2. If you look at their commercial banking side, it depends on: how well they refinanced their business and what degree of writeoffs they still have (this is the part no one actually knows exact figures). Still no problem, though as now refinancing is reaping at cheaper costs (1%),new business is growing slower though, as they sit on the bailout cash for now to see new regulation changes on capital requirements. (if any changes are imposed soon?)
Pending trouble could be if they made mistakes in both areas and are exposed to deals in those industries and markets most affected by this crisis.
3. If their gov. wants to make disappear more funds into bank bailouts, than they would not show directly a nasty picture of their banking system not to discourage investors/electorate and general clientele. The worse they can do is to pick up only on some singular banks, that they will know how to make it look in big distress.
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
