Bank Woes Deepening in Europe

The New York Times ^ | 6/30/09 | Landon Thomas Jr

[marshmallow]

When the financial crisis struck the global economy last autumn, European governments moved swiftly to keep their biggest banks from falling into an abyss — never mind fears over nationalization.

But now, as big banks on this side of the Atlantic show signs of recovery, a number of their counterparts overseas are sinking into a spiral of deepening losses that has prompted the European Union to consider a more aggressive approach to cleaning up its banking system.

Few people outside Belgium have ever heard of KBC Bank. But the travails of this lender, based in Brussels, highlight the broader challenges Europe is facing by not having more fully confronted the deteriorating health of its financial institutions.

Since October, KBC Bank has had to seek government relief three times. In all, it has received $41.5 billion in financing and guarantees to recover from disastrous mortgage bets that its financial engineers and traders made when times were good. For a bank with a balance sheet of just $425 billion, it is an astounding sum, exceeding the bailout of the Royal Bank of Scotland.

KBC is not alone. Souring loans and festering portfolios of securitized mortgages still plague a number of national banks.

Moody’s, the rating agency that recently issued a warning about the credit risk at 30 Spanish banks, is expected to lower its outlook for the Greek banking sector because of a sharp rise in nonperforming loans. In Ireland, the nationalized Anglo-Irish Bank still has a contaminated loan book that has emerged as threat to the country’s sovereign credit rating.

[grey_whiskers]

Banks got us into this mess, didn't they?

Cueing up the world's tiniest violin.

Cheers!

[KoRn]

Was subprime loans a global conspiracy or something? Just because our banks were being stupid, did that mean the European banks had to be stupid as well?