While Brussels upturns their bank recapitalizaton plan, the banks will likely struggle with the main problem caused by the Greek crisis, a problem that barely has to do with their level of solvency. Because financing markets are closed not only to Spanish lenders but to others throughout Europe, the banks and savings banks are looking for liquidity elsewhere: promissory notes.
Since the summer, when these kind of issues began to be directed toward many clients, the amount that institutions tried to acquire by this method had risen to 60 billion euros, which prompted questions about what does it mean to have no access to markets.
It also consists in the liabilities war, which still has a long life ahead of it. And even though the war no longer debilitates the already-thin margins for investments in the sector, it should not slow down regulations. The economic penalty for lenders with deposits utilizing high rates should not lessen stiff competition, because this is driven by demand.
While the EU plans, discusses, modifies, rectifies and goes back to the drawing board to figure out what measures to take in order to resolve the lack of confidence about the future of the euro and welfare in its constituent nations, the banking sector is hunkering down to simply survive. In the current environment, the priority is to build liquidity with which to meet agreement needs and respond to debt payments of nearly 120 billion euros that will come due by the end of 2012.
For that reason, size should also be sacrificed and we should forget about credit. While this kind of situation is difficult, little or none will contribute to economic recovery.
