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Moody's Sees Contagion Risk For European Banking System
London, 06 May 2010 -- As shown by the recent downgrade of Greek banks as a result of sovereign
weakness, the potential contagion of sovereign risks to banking
systems could spread to other countries such as Portugal, Spain,
Italy as well as Ireland and the UK, says Moody's Investors
Service in a new Special Comment entitled "Sovereign Contagion Risk
-- Part I: Assessing the Impact on Banking Systems of Southern
Europe, Ireland and the UK".
The report is available at: http://v3.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_124979
Overall, Moody's notes that each of these countries'
banking systems faces different challenges of different magnitudes,
but warns that contagion risk could dilute these differences and impose
very real, common threats on all of them.
This Special Comment assesses the contagion risk for those systems where
the transmission mechanism primarily stems from the market concerns about
the sovereign credit profile, but where, prior to this pressure,
the banking systems had been less affected by asset price bubbles or exposure
to structured financial products. These are the banking systems
of Greece, Portugal, and to some extent Italy. Despite
facing a fundamentally different situation compared with Greece,
Portugal is now under heightened investor scrutiny, resulting in
this week's review for possible downgrade on the ratings of all
Portuguese banks. A key factor determining whether contagion risk
continues in this case will be the market's view of the likely success
or otherwise of the recently agreed IMF and European Union support package
for Greece. Italy is another country where the banking system had
been relatively robust so far, but where the major risk to its banking
system could also be challenged by contagion risk should the market pressures
on the sovereign increase.
The Special Comment then explores those banking systems that have weakened
from within, often due to excessive loan growth (mostly Spain and
Ireland and to a lesser extent the UK); contagion could potentially
also spread to these banking systems where sovereign creditworthiness
has been impacted by developments within the banking system.
Moody's new report, the first of a two-part series,
is based on a presentation that Moody's senior analysts made to
investors in various European cities throughout April 2010. The
second and forthcoming part of this series, which will be published
shortly, will assess the exposures and capital implications for
major European banking systems to the four (most) vulnerable countries.
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The solution is simple - take a bank holiday for a week , seize the deposits and create new smaller banks with higher fractional reserves - I would prefer 50%.
Leave the worthless mortgage paper in the old banks where the owners can squabble for the scraps.
Create new interest free government paper to be chiefly used for vital capital construction and fill the massive deflationary hole caused by the much higher capital requirements.
The fact that something along these lines has not been done makes it obvious that the western world is run by the banks for the banks.
anything less than 100% is going to 0%. Backed by ????
but as you said "By the Banks. For the Banks. Of the Banks."
Captain Obvious
lol!!! Oh but its just the western world....thank you I can move to the "eastern" world now and be safe.
Please tell me what countries make up this eastern world you speak of that is free of Banksters.
Fair point Le Balance - but I worry that total control of money supply in any one groups hand is destructive wether it is the banks or the state - total power corrupts.
I know everybody dislikes bankers for good reason but if chieftains or princes gained total power things would not work out too well either.
We need to achieve a balance between both the Ying and the Yang.
These new smaller and less powerful banks would deal with a now smaller consumption sector in the economy while the state could create money for vital utilities which have been badly served by bankers who expect equal interest income from both consumption loans and capital expenditure.
I am frankly baffled why this is not the typical conservative postion.
As regards the East you are probably right but I do not feel very qualified to speak about a culture I know little about although the Japanese culture has to some extent been westernized.
Contagion = P+I
There is not enough Fiat to go around as the principal was artfully created but the Interest has not yet been printed. This will end badly until the debt holders agree to a hair cut. sorry but that is the truth, the whole truth, so help me God.
I have a question for TD - Why do you have the inside information when the rest of us 'Mortals' have to wait - 3 hrs. who the fuck gives you the dirt on the crap going down. This site is way scary and can probably beat the computers at HFT. One word - Thanks. I'm between The Cognitive Dissonance and Harry where the Fuck are you you wanker, loser, retrobate spruiker. Ok I like CD but he is a worrisome child who just needs a little space to fully express himself- but he will - just give him time.
P.S - I see dead people
Tyler and Marla are indeed scary. In Fight Club, that is a big compliment. They are extremely bad and I also am grateful.
If either or both of them ever need an Aussie slave, I must make myself available as a volunteer...
I agree. what is it about Australians and being one I would give anything to figure out what these people are on. I want some. it is so uplifting to see truth spewed out like a dozen xxxx at a B&S ball (but you have to be an Aussie to understand) sorry my USA friends, you have always made me feel at home and I do trust you to make it right, in the end (after you have tried everything else) - who said that for 100 bits of gold
The proprietary indicators I use can identify trend changes before they occur and they have been warning of a USD rally since last year.
Just posted a new EURUSD chart: showing long term trendline with important support around 1.2770
http://www.zerohedge.com/forum/latest-market-outlook-0
Stable door open, horse nowhere to be seen, Moody's arrives, closes door.
Fuckwits.
+1 after 18 hours of battle back and forth from East to West, Bruce and Jet have decided the conflict, its all over, spoils have been decided, everyone has gone home.
Ohhhh look, here come the cops.
Holiday.
Coming to a bank near you.
http://www.youtube.com/watch?v=vh7mLgP7YH4
When it rains, it pours.
UPDATE: Sarkozy, Merkel Call For Rating Agency Review
(Adds further detail.)
By William Horobin
Of DOW JONES NEWSWIRES
PARIS (Dow Jones)--The German Chancellor and the French President Thursday called for a review of rating agencies and suggested stricter standards under European law, especially for the process of rating sovereign debt.
Angela Merkel and Nicolas Sarkozy's called for a review of rating agencies in a letter to the presidents of the European Council and the European Commission, ahead of a summit meeting in Brussels Friday to finalize the support package for Greece.
Ratings agencies have been under fire from European leaders for their role in Greece's sovereign debt crisis.
French Finance Minister Christine Lagarde described the downgrade of Greek debt to junk status just before the closure of European markets last week as an "incitement to wrongdoing."
"In the light of last week's events, such a review should explicitly refer to the rating process for sovereign debts, to communication methods and the publication of rating changes and taking into account the possible role of credit rating agencies in amplifying the crisis and their impact on financial stability," Sarkozy and Merkel said in the joint letter Thursday.
They said the European Commission should make proposals to increase competition among ratings agencies, to review the use of ratings agencies in regulation and suggest ways of reducing their role in capital requirements.
Extracts from the letter had already appeared in the French press earlier Thursday.
Sarkozy and Merkel also said speculation should be discouraged by the introduction of adequate capital or collateral requirements for non-standard derivatives trading. The issue of "destabilizing short sales" should also be addressed, they say.
The main thrust of the letter is a call for increased economic governance in the euro zone after the sovereign debt crisis in Greece.
"It is our duty to preserve the benefits of the euro. This implies that we reinforce the coordination of our economic policies and the internal surveillance mechanism of the euro area," Sarkozy and Merkel said in the letter.
The two heads of state of the largest economies in the euro zone suggest more effective sanctions on excessive deficits and broadening surveillance to structural and competitiveness issues.
-By William Horobin, Dow Jones Newswires; +33 1 4017 1737; william.horobin@dowjones.com
-so I take it naked protection buying via CDS is to be banned? Muppets, honestly. Sell Euros.
Why don't they put that big containment box over Greece?
They should add a new section into econ/finance textbooks: Ratings Agency lag.
If the contagion can spread, it's because the body was a sesspool to begin with. Otherwise it wouldn't spread so easily. How easily it does should show light onto how bankrupt the world really is.
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