Morning Report Monday 27 October 2014
25 European Banks failing health check before the Murray inquiry results
Reports today of almost 1 in 5 banks that were measured in Europe failed the stress test should probably hold few surprises for most observers. As I have discussed previously, the world is striving to ensure banks hold no more nasty surprises that could lead to GFC 2, cynically I wonder if after so many missed the risks in sub-prime, how will people spot fresh risks now? “Black Swan” events are just that not predicted / discussed by the masses.
Most economists missed the 1929 Depression, 1987 stock market crash and the relatively recent GFC.
Please understand I have no problems with the process, it makes 100% sense that governments should never be required to bail out banks, but if the banks survived the GFC, they are probably ok now. History tells me these tests should be strengthened in 5-10 years, when people start to get greedy and have mostly forgotten the GFC. The failing banks rumoured to be in Austria, Greece, Ireland and Italy will have to make up capital shortfalls – language resonating around about our domestic banks. Housing affordability is stretching a significant number of Australian young buyers, leading to a surge in “family guarantees”. This is flowing to the vast majority of rhetoric and press, focusing on banks’ risks, being in property. Personally, I see very little risk to the masses here:
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