Euro Crisis : The case of Bank runs

BANK runs don’t always involve small depositors queuing round the block. As we saw in 2008, institutions can withdraw their money with devastating effect.

US money market funds are exiting the euro zone in what can only be described as a stampede. The rating agency Fitch says that the funds’ exposure to euro zone banks has dropped by 33% since May this year, and is now 78% down on its May 2011 Continue reading “Euro Crisis : The case of Bank runs”

ECB Buying Back Bonds


The European Central Bank is preparing to unleash its financial might and buy government bonds to help drive down borrowing costs in debt-ridden countries like Spain and Italy, caught in the grip of what president Mario Draghi called a “worsening crisis.”

Draghi urged leaders of the 17 countries that use the euro to use their bailout fund to take the same action, sending a clear message: Europe’s financial crisis requires more forceful remedies than leaders have so far been able to muster.

The move towards bond buying came a day after the Federal Reserve hinted it was leaning toward further action to stimulate U.S. growth, highlighting the Continue reading “ECB Buying Back Bonds”

Cutting off Greece from Euro !! Grexit

Jitters about the euro zone have roiled financial markets this week, sending the rand reeling and causing foreigners to dump SA bonds. As Spain and Greece move to the forefront of concerns about the global economy, the million dollar question is: How will these countries’ problems play out?
The so-called Grexit — a term coined by Buiter — would most likely take place by early 2013.

The renewed fears about a euro zone break-up may come as Continue reading “Cutting off Greece from Euro !! Grexit”

Hang the Short Sellers? Short selling ban in Spain

The European debt crisis is over! Italy and Spain have it all figured out! The problem isn’t unsustainable debt loads, ineffective economic policies and a lack of competitiveness on the global stage. It’s that evil short sellers are pushing down the shares of European banks just so they can make a profit.

Since the 2008 financial crisis, securities regulators around the world have waged ineffective wars on short selling.

The short selling bans in Italy and Spain are the latest attempt by Continue reading “Hang the Short Sellers? Short selling ban in Spain”

European Banks & The Regulatory squeeze


This month McKinsey Quarterly published a standout paper on the regulatory squeeze of the European banks with the concluding remarks that the new rules will lower returns, but banks may be able to regain some lost ground.

The analysis was based on the 2010 financial-year data, assumes that the cumulative regulatory impact expected over the next several years will be realized immediately. The Basel III and new regional and national regulations will help reduce retail banking’s average return on equity (ROE) in Europe’s four largest markets to 6 percent, from about 10—a 41 percent decline.

Interesting to see that fall on ROE in four markets :- Continue reading “European Banks & The Regulatory squeeze”