Risk of failure of banks?
The title is provocative but perhaps not so much.
What would happen to a company if it lost in just a few years even the 80 / 90% of its value?
And what happens if, for example if a company refuses to the vast majority of its clients (80/90%) the sale of its products and services, citing the risks of no-payment of goods or services?
In the first case, anyone who would doubt that the company can survive for long.
In the second case: THE SAME!
Unfortunately, this is what is happening with the banking industry.
Some big banks have lost a good part of their value and are widely exposed with businesses, families, etc.. and are also in a critical position with regard to loans to those countries such as Greece and others, that are quite in similar situations.
Even the use of capital by banks, is now reduced to a flicker, with the refusal to companies and individuals to credit facilities for any use.
How can endure a situation certainly not profitable for the banking system?
And what happens when short, Greece will make probably default?
Where to put the money?
What almost no one speaks and that in any case, begins to grow in the minds of many investors, is the question, if the banks will be solvent for a long time and how these, are able to withstand the current situation?
The current landscape, still sees a lot of credit institutions (smaller ones) that are overvalued compared to the real situation.
For now, we have seen a downgrading of the largest banks.
But when it will involve to also other banks that have still nominally retained their value, it could have major repercussions in every direction.
The credit crisis and the banking system: what will happen?
To date, the injections of liquidity and lowering interest rates by the central authorities, had the effect of aspirin or paracetamol, temporarily lowering the temperature of the sick person, that is, temporarily has calmed the markets and safeguarding the stability of the financial system.
In fact, they have, to a certain point of view, postponed any decision and resolution of critical issues for the future, hoping that something will be resolved in the meantime alone.
In fact, they are solutions that in the medium term, are not enough!
On the horizon, even countries like Greece, Portugal and Ireland, they could get worse and drag down with a domino effect also other nations such as Spain and Italy and this, without counting those Eastern European countries, such as Hungary where major banks are heavily exposed and for which, there are no short shooting conditions.
The limitation of the use of cash, imposes to people and companies to reduce withdrawals from the banks, shielding them from potential risks of assaults to the bank counters, in case of aggravation of the situation following the arrival of the alarming news that could spread after a possible default by Greece or any European bank.
Moreover, the bond that many banks have between them and that was created over the years through mergers, acquisitions, equity holdings between banks and banks, could increase this potential risk.
A resent shortly, for further discussion.
