Article

2008-10-01 Europe

European Governments Rescue Another Failing Bank

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Posted by Fred 2008-10-01 00:00|| || Front Page|| [6 views ] Top

#1 Ireland has guaranteed the deposits of its six largest banks.

Posted by Nimble Spemble 2008-10-01 08:32|| 2008-10-01 08:32|| Front Page Top

#2 When the US gets the financial flu, the rest of the world catches pneumonia.

Posted by Procopius2k 2008-10-01 09:09|| 2008-10-01 09:09|| Front Page Top

#3 http://paul.kedrosky.com/archives/2008/09/30/how_the_us_save.html

Posted by Bright Pebbles 2008-10-01 11:41|| 2008-10-01 11:41|| Front Page Top

#4 A key quote from Bright Pebbles' excellent link:

But the AIG case shows the importance of another link across financial markets, namely massive regulatory arbitrage. The K-10 annex of AIG’s last annual report reveals that AIG had written coverage for over US$ 300 billion of credit insurance for European banks.

The comment by AIG itself on these positions is: “…. for the purpose of providing them with regulatory capital relief rather than risk mitigation in exchange for a minimum guaranteed fee”.

AIG thus helped to organise regulatory arbitrage on a gigantic scale. A formal default of AIG would have had a devastating impact on banks in Europe. This explains why AIG’s problems had sent shock waves through the share prices of European banks.

For the time being the US Treasury has saved, inter alia, the European banking system, but given that AIG is to be liquidated European banks now have to scramble to find other ways of obtaining the ‘regulatory capital relief’ they appear to need urgently.

Posted by lotp 2008-10-01 12:10|| 2008-10-01 12:10|| Front Page Top

#5 http://www.telegraph.co.uk/finance/breakingviewscom/3117263/Financial-crisis-The-tsunami-will-hit-European-banks-harder.html

Posted by Bright Pebbles 2008-10-01 15:32|| 2008-10-01 15:32|| Front Page Top

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