This is an extract from FT dated June 12 2009. Copyright The Financial Times Limited 2009.
"Alistair Darling, UK finance minister, told the Financial Times this week that a failure by other European countries to clean up their banks could hold back economic recovery.” They continue:
“The euro has been laid low by fears over bad loans, with concerns over the exposure of banks in the region to a potential meltdown in the Baltic states and central and eastern Europe weighing on the single currency. Many commentators expect that trend to intensify. Maurice Pomery at Strategic Alpha says the eurozone banking system is in denial over the extent of toxic assets on its balance sheet. “We still don’t know the full story,” he says. Mr Pomery doubts that German banks have been operating on vastly different business models over the past five years than their peers in the UK, US and Switzerland, which have revealed their high degree of vulnerability to the financial crisis. “I think they have significant exposure,” he says. “Central banks are worried about opening Pandora’s box and when they do it will impact on the euro.” Analysts say the problems in the eurozone’s banks are likely to be swept under the carpet ahead of the German general election on September 27. Hans Redeker at BNP Paribas says there is no incentive for the German government to raise the issue ahead of the vote. But whoever wins will want to get the problems out of the way as soon as possible. He regards the German and Austrian bank sectors as the weakest in Europe. But falling real estate prices and rising unemployment will also weaken bank balance sheets in Spain.
"Alistair Darling, UK finance minister, told the Financial Times this week that a failure by other European countries to clean up their banks could hold back economic recovery.” They continue:
“The euro has been laid low by fears over bad loans, with concerns over the exposure of banks in the region to a potential meltdown in the Baltic states and central and eastern Europe weighing on the single currency. Many commentators expect that trend to intensify. Maurice Pomery at Strategic Alpha says the eurozone banking system is in denial over the extent of toxic assets on its balance sheet. “We still don’t know the full story,” he says. Mr Pomery doubts that German banks have been operating on vastly different business models over the past five years than their peers in the UK, US and Switzerland, which have revealed their high degree of vulnerability to the financial crisis. “I think they have significant exposure,” he says. “Central banks are worried about opening Pandora’s box and when they do it will impact on the euro.” Analysts say the problems in the eurozone’s banks are likely to be swept under the carpet ahead of the German general election on September 27. Hans Redeker at BNP Paribas says there is no incentive for the German government to raise the issue ahead of the vote. But whoever wins will want to get the problems out of the way as soon as possible. He regards the German and Austrian bank sectors as the weakest in Europe. But falling real estate prices and rising unemployment will also weaken bank balance sheets in Spain.
The low transparency of the banks’ accounts is a great worry for corporates and other investors. Probably there is more to it than meets the eye. If the FT is correct than the European governments are hiding very crucial information from us. That would not be ok! How can we know which banks to trust with our cash?
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