Global Banking: Some Sectors Look as “Precarious as Ever”
“Financial flameouts” are occurring despite relief from the European Central Bank
by Bob Stokes
Updated: October 13, 2020
Most people remember that the entire global financial system teeter-tottered on collapse during the 2007-2009 financial crisis due to the debacle related to subprime mortgages.
As you'll recall, even a financial institution as large as Citigroup was brought to its knees.
Of course, that was more than a decade ago and the fear of a "financial Armageddon" would seem to be a distant memory.
However, here in 2020, some European banking sectors appear to be on shaky ground, despite the European Central Bank's regulatory relief.
As a Sept. 17 Bloomberg article notes:
Banks Get More Capital Relief as ECB Wants Stimulus to Work
With a looser leverage ratio for the next nine months, banks will be able to make more loans with less capital.
Mind you, this is a fourth round of regulatory relief. Even so, some of the Continent's banks remain in a highly precarious position.
Our October Global Market Perspective showed these charts and said:
The ECB agreed to a fourth round of relief only because the previous three rounds failed... In total, the four rounds of regulatory relief equated to €73 billion, yet, for all the ECB's hard work, some banking sectors look to be as precarious as ever.
The snapshot comes from Spain, where Banco Sabadell, Spain's fifth-largest banking group, has barely retraced any of its 73% crash since December 2019. BBVA also continues to make fresh new lows, and Bankia... is still off 33% since last year's high.
Clearly, the weakening position of these banks, even with all the financial assistance, is not a good development.
Yet, there's even more cause for concern.
The October Global Market Perspective also analyzes the "financial flameouts" of two other European banks, one of which is a global giant.
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