Posted on 06/30/2010 7:21:13 AM PDT by TigerLikesRooster
The $5 trillion rollover
Jun 29, 2010 13:30 EDT
Banks around the world must refinance more than $5 trillion of debts in the coming three years, a massive rollover that poses threats to financial stability and growth.
The need to replace these debts, which are medium and long term, will place pressure on bank profit spreads and in turn may either prompt deleveraging, where banks sell assets that they can no longer economically finance, or simply lead to a bout of credit rationing, where borrowers must pay more to borrow, thus crimping investment and economic growth.
For banks in the UK, according to the Bank of England Financial Stability Report, the refinancings amount to about $1.2 trillion by the end of 2012.
If banks in Britain raise funds at the same pace they have been this year, they will only collect half of their needs in time. This is even before the fact that the banks need desperately to turn some of their riskier short-term funding into more reliable funding with a longer maturity.
“If funding costs increase dramatically, which is perfectly possible in what could be pretty febrile market conditions, that will hit profitability (and the banks ability to raise capital organically) until they are able to re-price loans and facilities,” according to Richard Barwell, an economist at the Royal Bank of Scotland in London.
(Excerpt) Read more at blogs.reuters.com ...
P!
No problem... we can just borrow more money to bail them out again like we did the last time.
The banks own 3 houses just on my block alone they couldn't sell in a million years.
And that's top notch inventory compared to the commercial properties wasting away downtown!
ping
You mean like when the UK banks were sold fraudulent financial vehicles, went to get their assets back and discovered that the US had nationalized the debt-holder?
Don’t like paying your legally accrued debts? Stop trying to sell people fraudulently-raised CDOs then.
Obammunist Ebonics, Keynesian Economics and Socialists are not good for the economy and are fatally flawed plans. They never work and always result in total disaster.
I’ve bought three versions of Monopoly at garage sales recently. They are stacked with cash I can use for the future.....
5 trillion? If only it was that little. Try triple that and we are close.
sfl
The blog doesn't break down or qualify what kind of debt is included in this $5T number, only that it's due for rollover within 3 years.
The article sort of implies that all of it is a private (commercial or mortgage) debt, while the problem is that much of this "debt" is either government (notes and bonds) or sovereign debt which keeps piling up. Private sector and the financial / banking sector has been deleveraging since 2008 and bailing out governments long before that, while governments keep running deficits and levering up, even with their new supposed so-called "austerity" measures (no thanks to Obama and his economic team who encouraged and would like foreign governments to keep spending).
For instance, are Fannie and Freddie "banks" or government agencies, because they alone hold much more than $5T in mortgage debt (granted, not all of it is due within 3 years)? And the banks have been holding and keep buying the ever more expensive high risk government bonds (a bubble that's due to burst in the next few years) to bail out the governments which have little fiscal sense or incentives to be fiscally responsible... at least, until "Greece" happens.
Fannie-Freddie Bailout Could Cost Taxpayers $1 Trillion - FR / CNBC, 2010 June 29, by Steve Liesman
And $1T cost of bad debt is likely an understatement... but now it's all ours, officially, not "implicitly," and nobody gives a darn.
It's the piles of government debt we need to worry about (even when they hide it under ostensibly "private labels" like GSEs, public-private ownership, Third Way, etc. etc., not the private investors whose own money is on the line and who don't expect to be "bailed out" by the governments that just keeps taking and spending on themselves and their friends.
The US alone is probably 5 trillion dollars a year. Most of the funding is being done through short-term T-bills as they try to hold down long-term rates to prop up housing.
http://treasuryauctionwatch.blogspot.com/
www.chicagotribune.com/business/ct-biz-0630-notebook-banks-20100629,0,5897109.story
chicagotribune.com
Chicago-area banks losing money
By Becky Yerak, Tribune reporter
9:08 PM CDT, June 29, 2010
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Two years into the banking crisis, Chicago-area lenders have yet to find a bottom.
As a whole, banks headquartered in the Chicago area are losing money, and the bad loans and foreclosed real estate continue to climb, according to a report by Loan Workout Advisers LLC and MDI Investments Inc. provided exclusively to the Tribune.
For consumers, the fallout could mean jumping through more hoops to get loans as banks try to minimize their risks.
excerpt
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