... Richard Anthony sees the train coming layoffs. September 21, the Financial Times, we can not be accused of left-Gazette, stressed the fragility of the banking system in search of 1.500 billion recapitalization. Should we expect the second wave of credit crunch ? The pen nuanced Tony Jackson has more than earned our house translation ...
problems banks may be more severe than people imagine
[Financial Times 21 September: "Maybe the banks are in Worse Than disorder weekends realized "by Tony Jackson]
It hurts me to say this, but maybe we are wrong completely on behalf of banks. Some say that the financial return to their old bad habits and need to impose retaliatory measures - the first and most concrete consisting revise upwards the funding requirements.
But their problems are perhaps more serious than we think. Maybe some of their most egregious mistakes, such as the huge premiums commitment, is actually a defensive action against the credit crisis coming. In which case fight against them now through recapitalization requirements could make only relieve our good consciences at the expense of our finances.
And there is no doubt that such requirements are the order of the day. Indeed, the Council on Financial Stability - representing finance ministries and central banks worldwide - said last week that was their priority.
To illustrate the risks involved, we refer to a recent analysis from Institutional Risk Analyst, a U.S. consultancy bank. This class U.S. banks based on their level of effort from A to F. The amount must, of banks' total assets level F - those closest to the gulf - is $ 4.458 bn.
If these banks fall below that amount, the cost of repairing their depositors will fall on other U.S. banks, under the rules of the Deposit Insurance Fund.
As noted IRA, "before the G20 does the question of increasing the level of bank capital, we must find a way - and fast - for stabilize the existing capital base of the banking industry.
remember that the money needed to recapitalize in good and due form banks are enormous - not only because of the losses they have incurred during the crash but also because they had reduced their equity disastrously during the "bubble years".
To perform the job properly, we need to restore the cap levels on the basis that they had in the mid 90s. Six months ago, the International Monetary Fund has fixed the cost to U.S. banks, European and UK to $ 1.700 bn (£ 1.044 bn).
Since then, according to Dealogic, these banks have raised $ 135bn in equity, we can therefore reduce the figure needed to $ 1.565 bn. But the fact that less than one tenth of the amount has been reached is not very reassuring ...
past six months, remember, have seen the banking shares skyrocket, making investors more willing to pay. And some fundraisers have also received aid from the government.
During this period, the aggregate market value of banks has more than doubled, from $ 1.068 to $ 2.420 bn m. However this still leaves them the possibility to reach a sum equal to two thirds of its market value. Looks like we've reached the limit - especially since the last survey from Merrill Lynch showing the most important consensus among the managers of global funds for the past seven years, according to which the bank shares are currently overvalued.
For all of us, these results could be perverse or untoward. If banks know they will be required to increase their capitalization - and if they foresee that they will not increase their equity - they have only one logical answer. They must shrink their asset base - which means they will indirectly reduce the loans they grant.
This comes at a time when alternative methods are always ready to rout. Borrowings in securities, for example, represent less than half the peak pre-crisis period, given that banks return within national borders.
More importantly, the securitized loan also works at about half the pre-crisis levels. This means that nearly $ 2,000 bn of credit, usually provided not by banks but rather by investment institutions, were removed from the system.
Despite emergency measures taken by governments to remedy this situation, the situation does not bode well. Much of applications has gone for good, as off balance sheet vehicles such as special financing vehicles.
And the new licensees will have on the fingers of the hand. The securitized loans are, by nature, complex structures, and their purpose was to offer triple-A rated tranches that institutional investors may acquire. This requires absolute confidence in the rating agencies. Today that faith is seriously shaken, who else would love to go put his nose in this kind of mess?
Other traditional sources of investment for the banks themselves - the wholesale markets, for example - are still weak. Bond markets are an exception, but only up a certain point. Dealogic figures show that last year, bond banks have declined - despite the government's help - 14 percent compared to pre-crisis levels of two years ago. Bonds issued by nonfinancial corporations, meanwhile, rose 44 percent.
The position of governments in all this is not enviable. These cis certainly aware of the dangers. But given the immense power of the bank lobby in the world, each government will also require banks to recapitalize - as is certainly necessary - it must exploit popular resentment while there is still time.
Like many other things in a crisis, timing is everything. But we should be careful not to take the apparent satisfaction of the banker for cash! They are maybe just alone in the dark, whistling for reassurance.
tony.jackson @ ft.com
Crisis for Dummies 
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