Lehman bankruptcy three years, exacerbated by the financial crisis ...

80 That the most serious financial crisis, the worst has passed three times, a little more clear than ever: Many people think of this before the end of the two crises continued, and in some , especially in the United States and the euro area, is still growing. Business people and politicians have said that credit is either not available, or the cost is too high. Banks complain that their profits are too large to squeeze, investors are abandoning them away. Caught in the middle of the regulatory authorities are trying to figure out their natural reaction to the crisis ? the drafting of stringent new regulations ? in the end is as expected, is to build a more powerful system, or so fragile global economy even worse?

Panic once again thrown

Before those banking structure in 2007, doomed to an accident will be inevitable. Agencies in the pursuit of huge profits in the process, the behavior has become distorted. They hold very little equity capital, can not protect themselves. In many cases, they really hold debt instruments debt was magnified 50 times. Their cost of borrowing through the (usually short-term debt) to earn huge profits, but also assumed, from domestic to complex mortgage derivatives and other risks inherent in the product is negligible.

Today, the profitability (return on equity ROE up to 25% to 30%, many blue-chip industrial company five times) the cornerstone of the no longer exists. Many banks share capital is currently held three times in the past, is six times the liquidity facilities. The leverage ratio is usually reduced by 20 times, risks have been reassessed, the profit dropped sharply. Take the most popular standard bank ROE, the bank can expect the highest level of the current crisis is only half the range.

And then implement a series of regulatory agencies requirements for financial institutions should hold capital and liquidity amount to manage. Although most provisions are from the global regulatory standards of the Basel Committee?s new (to be gradually put in place before 2019), analysts and investors are still put pressure on the banks, asking them to achieve compliance as soon as possible. Past two or three years, they have a very short mantra: capital ratio ? specifically equity to risk-weighted assets ratio ? the higher the better.

However, there are still signs of the resurgence of the financial crisis. Three former government relief the direct costs of failed banks, with the banking crisis and economic slowdown caused by excessive borrowing leading to suffer long-term indirect costs, are in an unsustainable debt burden among European and American sovereignty to be reflected. Which in turn reacts to the still-fragile banking system, leading to the traditional view that the safety of government bonds held by banks portfolio significantly impaired.

Bearish market sentiment comes as the latest target of the Bank of France. The bank regulatory agencies in support of France refused to follow the example of Switzerland, Sweden and the UK counterparts launched to raise the level of capital operation. At the same time, the French Paribas, Industrial Bank (601166) and exposure to agricultural credit banks are higher than Greece.

Policy makers are struggling without loss of bank capital buffers, under the premise of the euro area economy to repair the defective fundamentals. At the same time, float to the surface again with the panic, the whole of Europe within range of the short-term liquidity of many financial institutions are gradually drying up the supply ? it is this panic, leading to the 2007-2008 British bank Northern Rock and U.S. Lehman Brothers bankruptcy .

?Over time, the problem only in the euro zone?s deteriorating fundamentals,? the industry said, ?Many of the bank?s liquidity or duration becomes shorter, or is dependent on the government?s measures.?

Friday the Greek sovereign bonds holder of the private sector to sign voluntary agreements, will be extended to a maximum of 10 bonds the deadline, which may trigger a new round in the entire euro area market bearish sentiment. Bankers expect the holder of the private sector participation will not reach 90% target, if the politicians think that the inequitable distribution of the debt burden, and could threaten Greece?s next to a relief fund.

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Source: http://www.finance-ol.com/2011/09/lehman-bankruptcy-three-years-exacerbated-by-the-financial-crisis-continues/

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