Europe's Banks

[jyl]

There is a graphic is the NYT that shows the size of each country's banking sector relative the the country's GDP and national debt, and the leverage used by the sector.

http://www.nytimes.com/2008/10/11/business/worldbusiness/11charts.html?_r=1&ref=business&oref=slogin

It may take some effort to decipher.

This shows why Europe's banking sector is in trouble. It is bigger relative to the country's size than the US banking sector. It is much more highly levered (US commercial bank regulators did one thing right). And, of course, the US has a single central government and central bank, while Europe is multiple governments who must coordinate with each other as well as with the ECB.

Finally, while some complain that so many ex-Wall Streeters are in the US govt, they grasp what is happening and the need for action, better than the career civil servants in some European governments have appeared to.

Early on, then the problem was simply US subprime mortgages, European banks might have seemed unaffected. But now we have a global and general fall in asset values and de-leveraging. If you are levered 52 to 1, a mere 2% decline in asset value makes you insolvent. Not even the most risk-loving US investment bank was levered that much. Yet, if this NYT graphic is correct, the entire German banking system is that levered.

If anyone who has looked more closely at European banks wants to chime in, i'd be very interested.

[Paco Anton]

Disregarding Switzerland (which has a unique banking structure), the first three countries have already experienced major bank bankrupcies, namely Fortis in Belgium, Nothern Rock and a couple others in the UK and the whole banking system in Iceland. According to that chart the next targets are Italy, France and Germany (Didn't Hypo bank already fall there?)

I'm glad to see that Spain is near the end of the line

[competentone]

I read the article and just glanced over the graphics, but already see a fundamental problem with using "GDP" (Gross Domestic Product) when trying to evaluate the problem.

Including GDP is implying that somehow GDP is at the "disposal" of the government/banking system to use.

To the extent that an economy is socialist, I would guess that is true. But if GDP is mostly private, it doesn't represent an "asset" necessarily available to "balance" against "liabilities" in the banking/public sector.

It is sort of like if I was evaluating a person's financial situation, but looked at his extended family's incomes and compared that to his debts. Yes, the family might pitch in and help the person with his debts, but treating the extended family's income as an "asset" available to cover debts would be foolish.

That said, it still is an interesting analysis of the different economies and their different financial pictures.

[svandamme]

Fortis crapping out was basically this

they grew to fast, wanted to buy ABNamro, and after the cash ran a bit dry because of the subprime crisis, they found out they had no cash left to run the bizniz... stocks plumeted, folks cleared out their portfolio of Fortis, and their bank accounts...

So they split it up, the Dutch bought Fortis Holland , including ABNamro for about 16 billion euros
and the Belgians govment bought Belgian parts, and stocks rose again

untill the Dutch finance minster , Wouter Bos was so kind to go yapping around that he was happy he bought the Dutch part of Fortis and ABNAMRO, the solvable part back and left the bad part to the Belgians... which then caused the Fortis stocks to dump again And now that stuff was sold by the Belgian gubment for a billion euro profit to BNP Paribas

something like that...

Either way, shareholders are furious, some are starting up lawsuits against Wouter Bos, the Dutch Finance minster, for insider trading and some other grievances...

our PM was/is also medling ... dude hasn't been able to form a real gobment in over a year in power, and now he's doing multi billion trade deals with the dutch... one thing about the dutch. trade is kinda their thing... so you gotta know what you are doing , which our PM frankly doesn't... then again, he did make 1 billion euros , flipping the stuff he bought to BNP Paribas the next day.... but that happened at the expense of , yet again, the shareholders

interesting times... not really affected, as i had no stocks or wads of money on bankaccounts of failing banks... if anything, i should be coming 100% debt free in a few months... might be worth looking into buying some stuff when the **** has cleared the fan again

or maybe i'll just go play blackjack in a casino... i've only done it 4 times in 4 different casinos (including Monaco) and frankly, i've always walked out with at least twice of what i walked in with...

[Peterfrans]

Stijn,

You forgot to mention the splendid role count lippens had, when he failed to properly inform his shareholders on several occasions. Bos probably did not need to say what he said, but it is also fairly typical that the belgians blame the dutch.

That said, I will limit my visits to brussels for the next weeks. Dutch number plates are probably not very popular is Belgium nowadays

[svandamme]

yeah, Lippens ain't showing his face no more these days
if it were up to me, they should confiscate his assets, and sentence him to flipping burgers to fund his retirement

as for blame, i'm no banker, so frankly i don't follow the details to much, was just summarizing what the sentiments were in the newspapers

you're still welcome here Pete... bring one of yer 911's, they got black plates anyway...