Thursday, October 13, 2011

Is This a Plan?

According to Robert Peston:

"The European Banking Authority is proposing that eurozone banks should hold capital equivalent to between 9% and 10% of their risk-weighted assets, on a Basel 2.5 basis, with sovereign debt in trading books and banking books marked down to market prices."

He estimates that this will cost around £200BN. However, both France and Germany appear to be behind the "plan".

The question is, given the amount of lies and rumours spread by the Eurozone "leaders" in order to push up the markets, is this a plan or not?

That all depends on whether there is genuine agreement between France and Germany over this, and what they then actually do to implement it.

For instance, were they to allow banks to achieve the improved capital ratios by reducing the size of their balance sheets then this would have disastrous consequences for lending just at a time when Europe needs to haul itself out of recession.

In essence, if it really is a plan it may not be a very good one.

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