Skip to comments.European banks have $3 trillion of exposure to emerging markets (4X that of the US)
Posted on 02/04/2014 3:48:29 AM PST by Red in Blue PA
LONDON (Reuters) - European banks have loaned in excess of $3 trillion to emerging markets, more than four times U.S. lenders and putting them at greater risk if financial market turmoil in countries such as Turkey, Brazil, India and South Africa intensifies.
The risk is most acute for six European banks - BBVA, Erste Bank, HSBC, Santander, Standard Chartered, and UniCredit - according to analysts.
(Excerpt) Read more at finance.yahoo.com ...
Maybe I’m missing something here, but I don’t understand why these banks go along just fine - making risky investments they seem blinded to, and then one day they just ‘wake up’ and realize - “we’re exposed to some really risky investments”.
They seem like gamblers, all warm and happy drinking free drinks as they put money down at the roulette table, but then sober up and realize they may not be able to pay their hotel bill.
Too big to fail always worked for them in the past.
That’s ok, the money came from the US Fed
aka submerging markets
think center and periphery where hot money moves back to the center for safety reasons
THAT'S when they ‘wake up’....and start pointing the finger!
Yes and ben burnandyankme gave them EIGHT TRILLION DOLLARS IN NO INTEREST LOANS OR OUTRIGHT GRANTS SO THAT IS AMERICAN TAX PAYER DOLLARS AND NOT EU COMMIE DOLLARS! WE ARE SCREWED, BLUED AND TATTOOED!
I suspect the article conflates loans to sovereigns and loans to corporates - two very different things. There can be good companies in bad countries, and not all emerging markets are in trouble.
This is a little story that the business channel folks told one day, which you won’t usually hear much about.
During the last decade when Libya was riding along on the Qadhafi family train...there was a investment opportunity with the family and some New York investment team (Lehman Brothers, I believe) occurred. The family pulled out around two billion dollars. The belief was....they’d likely double their money within five years. Yeah, they sipped the same kool aid as everyone else.
So around 2008 came around, and the family woke up to realize they’d lost somewhere around half their money. They demanded the investment company send representation to Libya and personally explain this. So the NY City bankers sent two guys. I doubt if the two realized the implications or dire circumstances.
After the first initial meeting with family members....it was obvious that the two probably had an hour or two of living left...before they’d be killed or dismembered. The two walked out a side door and got out into the middle of town, to pull out a ‘magic-card’ which they’d been given with some British ex-special forces agency. They simply said...they were in trouble and needed real help (not that fake US gov’t help or such). Within minutes...someone appeared....took the two by car out of the city, and they escaped with their lives.
The problem here...which I will drive home easily...folks have excess sitting there and want growth. If you have $100,000 then you’d like to grow it to $150,000 within five years, and you kinda expect minimum risks in this. Payback doesn’t work that way.
So you have a dozen millionaires sitting in Miami with $500 million each, and demanding various banks take their accounts and work on inventing growth out of thin air. The dimwit banker does his magic and invents a highly risky deal....which has vast potential to failure.
Go over and examine every piece of the Cyprus failure. There’s a five star story sitting there....detailing these poor Russian billionaires who didn’t trust Russian banks or investment schemes. So they went to the only place in Europe that would accept them and their cash with no questions asked....then demanded the idiot Cypriot bankers get a return of eight to fifteen percent a year. The Cypriot guys early on....felt they could handle the cash flow and make some wise investments (that mentality lasted maybe a year or two)...then they just started to gamble on anything that moved...to get the payback they advertised to the Russians.
In brief summary....we have way too much cash sitting there and needs investing. But we’ve allowed ourselves to fall all over expectations beyond five or six percent (the old norm)...and waking up to this new reality is a harsh thing for those of us in the real world.
No wonder they scream murder when the US does not help an Earthquake site. Imagine if beijing shooked up. All those bonds they would sell to pay for reconstruction.
were exposed to some really risky investments”
Yeah and the cry will be...”Help us again American suckers, print more money and impoverish more of your descendants...or else we’ll be in a big fat war again!”
“That paper money has some advantages is admitted. But that its abuses also are inevitable and, by breaking up the measure of value, makes a lottery of all private property, cannot be denied. —Thomas Jefferson to Josephus B. Stuart, 1817. ME 15:113
Well said. I've done some presentations to venture capitalists, and it's amazing to me the return on investment they want (e.g. at least double their money in 3 years). This is crazy.
“And they want zero risk too! “
Yep! If everything goes belly up they want a guarantee that they get their money out first. It’s very risky to invest in an entity that is beholding to VC like this. If things go sour - they’ll get their money before you are even thought about.
My thought is that bankers like to go for rides but would rather not drive their own car
That has been my experience.
“My thought is that bankers like to go for rides but would rather not drive their own car”
They know that the EU will just steal money like they did in Greece from bank account holders.