The European banks will generate record profits in 2012. As long as Greece doesn´t default on it´s debt, the estimated earnings for 2012 will exceed 107.4 billion euros, a 6.2 percent increase from 2006. Importantly, these entities have benefited from central bank cash injections and negative real rates, allowing for international arbitration, possibly contributing to rising commodities prices and certain emerging markets assets.
Germany´s suggestion of imposing a fee to these banks, which effictively allows all parties to share the financial burden, will help offset losses generated from a highly probable Greek default.
Not surprisingly, the ECB and members of the EU already own as much as 60 percent of greek bonds, and this number will continue to increase. Banks play a significant role in the financial system and need to take responsibility as quickly as possible.
Their attention should not be on increasing top bankers pay, which has increased 36 percent on average, rather, their focus should be on sharing this debt burden.
It seems banks have not changed. There is little tolerance from taxpayers to absorb these losses again while the financial sector prioritizes its profits. Alarmingly, this banking industry that has been driven by short-term profits still controls the authorities that govern them.
The past should inform the present: the banking industry must be better monitored and supervised.
