In the next 18 months European banks will need to come up with EUR 1,65 trillion to roll over their short time funding loans. The financial institutions in the Euro area need a lot more money than banks in the US, UK or any others in the world.
“For the sake of the banks and the broader economy, a little more openness would be a good idea.”
“Throughout the recession and recovery, many European banks have sought to sweep their problems under the carpet in the hopes that they could solve them in a better and more profitable future. Now, though, they’re running out of time,” Mark Whitehouse writes in a Wall Street Journal blog post.
As investors fret about European banks’ exposures to Greece and other financially troubled countries, those banks’ borrowing costs are rising sharply.
That wouldn’t be a problem if they didn’t need to borrow, but as it happens they need to borrow quite a lot: This year and next, some $1.7 trillion in euro-area bank debt will come due, far more than among banks in the U.S., the U.K. or elsewhere.
If banks are forced to renew those borrowings at high interest rates, the resulting debt-service costs will make it still more difficult for them to earn their way out of their troubles.
If they choose not to refinance, they’ll have to sell assets and cut back on lending — anathema to European economies still struggling to recover.
Given the stakes involved, it’s surprising that European bank regulators aren’t being more forthcoming with details of the stress tests aimed at restoring confidence in the region’s banking system.
Dancing In The Dark
So far, investors are being left in the dark as to what many of the key assumptions in the tests’ various scenarios will be — including how much debt holders will lose if Greece, Spain and other countries default on their government bonds.
For the sake of the banks and the broader economy, a little more openness would be a good idea.
Related articles by Zemanta
- It’s Not Just European Governments That Will Be Crushed By Debt Maturities, Banks Need $1.65 Trillion Very Soon (businessinsider.com)
- Short-term Borrowing a Gathering Storm (dealbook.blogs.nytimes.com)
- Crisis Awaits World’s Banks as Trillions Come Due (nytimes.com)
- Banks Will Face Their Own Debt Crisis as Trillions Come Due (nytimes.com)
- Spain’s Caja bailout: EUR 11.2 bln and counting (forexlive.com)
- MONEY MARKETS-Cash drain points to rising Euribor (reuters.com)