Posted on 11/29/2009 6:06:35 AM PST by TigerLikesRooster
Bundesbank fears relapse as German banks face €90bn fresh losses
The Bundesbank has told German banks to take advantage of renewed confidence while they can to prepare for likely losses of €90bn (£81bn) over the next year, warning that the delayed shock waves of the economic crisis still pose a major threat to global recovery and bank finance.
By Ambrose Evans-Pritchard, International Business Editor
Published: 5:23PM GMT 25 Nov 2009
The Bundesbank said German banks alone will have to write down 50bn to 70bn euros of loans over the next year
The venerable bank said in its Stability Report that the world had narrowly averted a "virtually uncontrollable" collapse in the late summer of 2008. While the credit system has partly stabilised, the underlying problems "are still far from being overcome" and money markets are not yet functioning properly.
"It is already clear that the financial system will be severely tested going forward. Downside risks remain pre-dominant," said the report.
The danger is that a long phase of stagnation and rising job loses in the West sets off "spiralling loan losses in both industry and in the residential and commercial real estate markets. In such an unfavourable scenario, negative feedback between the real economy and the financial system could gain added momentum."
The Bundesbank said the next wave of bank write-downs will come from loan book losses as the default rate on lower-tier companies tops 14pc in the US and 12pc in Europe. German banks alone will have to write down €50bn to €70bn of loans over the next year.
Losses from sub-prime securities are mostly in the open already. Further write-down from collateralised debt obligations (CDOs) - mostly tranches of mortgage debt packaged as securities - are likely to be €10bn to €15bn.
(Excerpt) Read more at telegraph.co.uk ...
Ping!
Buy gold or silver, canned food and ammo.
...the Dubai default is troubling...those kind of things can snowball.
Better keep that “snowball” in Dubai under refrigeration.
That's an incredible amount of money for a single financial system the size of Germany's to bleed in one fiscal year. In fact, when all of the other downward trending variables are factored in, at some point, "insurmountable" could easily become the word of the day.
I realize that many here are busying themselves with the vital Tiger Woods threads, but this is a big story.
Ambrose has previously covered the exposure of German banks to sovereign debt of the former Warsaw bloc countries, including the Baltics. If I recall correctly, the total sovereign debt exposure of German banks is on the order of 200-300 billion Euros and no one is expecting this debt to be repaid 100%. The question is rather when will it go bad and how much will be bad. At the moment, there’s a major contraction (GDP down 25-30%) in the worst of these countries (Baltic republics mostly) so there’s a near certainty of major defaults soon.
Add their sovereign debt exposure to the questionable commercial loans and if both go bad at the same time even the Germany government may be unable to bail out the banks.
Jack
I'm still waiting for the October stock-market collapse.
Locally, there are line after line citing Deutschebank foreclosures. How much can these German banks write-off?
The ultimate end of the “Boy Who Cried Wolf” story was that there really was a wolf.
A somewhat long read, but worth it. Dubai's Debt Woes Could Further Unhinge U.S. Commercial Real Estate Sector
...thanks Oatka!
Right
During the bubble years the prosperous German banks ran out of parties to lend to so they lent like crazy to former East Bloc nations. Loans now going bad and defaulting and partly because East Bloc real estate is going sour. All highly deflationary. Money and credit get “destroyed”. There is less fictional fiat money to play around with and to keep the system jazzed up and humming.
This is why 0bama and his Federal Reserve are “creating money” at a breakneck speed. To try and counteract the money destruction going on. A partial explanation
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