Mittwoch, 5. Oktober 2011

Financial Crises 2.0 ante portas

We are definitely back in the dark days of the autumn 2008. That was my strong feeling, when the news about the life-threatening funding and liquidity crises of Dexia broke. The Franco-Belgian bank will be split up now, toxic assets will be put into a "bad bank", the governments have provided a state-guarantee for the lender. But who cares about that? The shares have more or less halved their value. And nobody believes, that Dexia can survive in it's current form.
The real problem is not Dexia. The real problem is, that Dexia represents just the first European bank in this new phase, the Financial Crises 2.0. We are staring in the abyss. Who's next? All banks with a similar model - fund short term, lend medium-long term - are now eyed with extreme mistrust. That was already one of the main reasons for the first round of collapses in 2008/2009,  like Northern Rock and Hypo Real Estate. The fact, that sovereign debt from the periphery plays nowadays more or less the same destabilizing role as CDO's and similar structured credit in the first phase, makes all banks with a portfolio of Greek, Spanish or Italian bonds, like Dexia,  extremely vulnerable. The parallels between October 2008 and October 2011 look embarrassing. 
I'm sure that the Financial Crises 2.0 cannot be resolved simply by propping up the capital of the European banks. That would be only the right method, if capital strength would be the key weakness of the system. But: the equity base today is already far far stronger than it was in 2008. Markets don't take notice of that. No! The real problem once again is funding and liquidity and the underlying issue is the lack of trust in banks and peripheral European sovereign debt. 
Instead of wasting time discussing about the capital of the banks, the Finance Ministers should discuss seriously about leaving the trust crises once for good behind us.       

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