雅思阅读:Unlike in 2008, banks exposures are there for all to see
THERE are worrying similarities between 2008 and today as indicators point to another interbank lending freeze. But there also some important differences: credit bubbles are deflated, housing prices adjusted, private debt reduced and, last but not least, banks have started to deleverage their balance sheets, mainly by strengthening their capital and reserves; even in Europe, banks have increased their capital by more than 20% on average since Lehman.
However, the decisive difference is with regard to the distribution and probability of expected losses, resulting in 2008 mainly from housing loans but today from government debt.
In 2008, losses resulting from the subprime and securitisation debacle were a done deal; there was no quick remedy to revive the housing market. But what was unclear was the exposure of each bank to these toxic assets, especially as exposure came not in plain vanilla but in wrapped and structured style. Governments task was to make sure that banks could withstand the losses that were bound to hit the banks. Not knowing which banks were most exposed, they offered a wide range of public support to all of them.
Today, the exposure of each bank to government debt is there for all to see, thanks to the last round of the European banking stress tests. But writedowns on these assets are far from clear ; it depends entirely on the actions of policymakers. It is in their hands to avoid default.
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2016-02-26
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