The Costa Bankia (May 25th 2012)

From May 25th 2012

The BANKIA piece probably comes across as just another headline. Unfortunately it isn’t. It was only a day or two ago that we learned that the entire European inter-bank lending system is almost at stall speed.

So where is the money going to come from?

Spain the state?

Where will they get it from?

The ECB?

And how will Spain pay it back?

Even with the sponsorship of Spain, what collateral will Bankia provide in order to access the ECB’s largesse?

How many people are familiar with IAS39 or IFRS9 in the UK?

It’s the one that says if, as a bank, you hold an asset to maturity (i.e. a non-trading asset) you can leave it on the books at par.

I wonder what the fair value of the securities on the asset side of the balance sheet will be, when a realistic assessment of the bank’s loan book is made?

I wonder if we will find that some of those ‘assets to maturity’ are in fact trading assets but have not been properly disclosed?

Late night Friday downgrades associated with a further €19bn bailout requirement (possibly more).

Would you as a depositor want to leave cash in the bank on Monday?

Would you believe the assurances of a national government that could have to face more bailouts and more austerity as the ECB price for further loans. With unemployment at 24% and youth unemployment at 50% what are the chances of that government actually being around by the end of the year?

Bank runs on Monday?

And we thought Greece had a problem.

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