Recapitalization of European banks could result in a drop in overall lending to emerging markets of over 500 billion euros! Ouch!
Shrinking the balance sheet and complying with the 9% minimum capital ratios are just reinforcing the negative feedback loop. Raise capital and reduce risk, sell off assets, cut lending, shrink credit, economies worsen... rinse.. repeat...
For a global interconnected economy, this could get really bad, really fast. We're not talking just businesses anymore, we're talking sovereigns and emerging economies.
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