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Australian Banks Given One Week To Prepare For European Meltdown

 
 
 
 
 
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Whereas previously we had heard extensive horror stories about banks being told to prepare for the end of the world in case the European summit (the latest and greatest one from last Friday which was supposed to find a cure for cancer among other things) failed, and even went so far as to read about preparations for trading in the drachma on a when issued basis, once the summit passed (and it was clear that media posturing would do nothing to fix what has already been a failure and it would be best to remove the threats of “reality” from the public’s attention) all such “end of the world” speculation promptly disappeared – after all why remind people that things are now worse than ever. Until today. According to the Australian Finance Review (link – subscription required), banks down under “have been given 1 week by regulators to stress test how they would handle a spike in joblessness, plunge in home prices spurred by EU debt crisis.” Aka a European “Meltdown.” And since we don’t have immediate access to the article, we leave it to Bloomberg First Word to describe for us what the article says:

* Australian Prudential Regulation Authority envision worst-case scenario of 12% unemployment, 30% drop in house prices, 40% fall in commercial property values, AFR says
* Banks will assume that write-offs, other mitigation measures are unavailable; later stress tests might allow for such steps, AFR says
* Australia’s banks have A$87.2b of exposure to Europe, or 2.7% of assets, with A$74.6b of it mostly tied to bank borrowers in France, Germany, Netherlands, AFR says, citing RBA statistics

Why is this notable? Because unlike before, when media reports were really a propaganda ploy to get European politicians to collaborate (what has now proven to be an impossible task), and nothing but a rhetorical device, this time around, the warning is for real. And, more importantly, we have a sense of urgency, courtesy of the 1 week deadline: the question then is is it really that bad, and does Europe truly have a little over a week for global banks to prepare for the inevitable fall out?

Lastly, how long until our own prudent leaders decide it may be time to push the Stress Test scheduled for next year forward, just in case the “unthinkable” does happen, and US banks end up getting stampeded even as the rest of the world is already prepared for a worst case scenario?

We are confident Tim Geithner will get right back to us asap on all of these open items.

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  • Rick Alexander

    I am an Australian citizen, residing in Sydney and I find it incredible that our ‘government-run’ media is very sketchy on reporting the truth (does that sound like most governments?). It was only last month that the Federal Reserve in Australia admitted that in 2009 they were printing and delivering billions to cope with the ‘mini’ bank run on funds – so what haven’t they been telling us. Well, they haven’t told us that our four major banks are major share holders of each other. But the main thing they haven’t told us that the primary shareholde of all four Australian banks is Chase Manhattan – well, that’s its old name – the correct merged name is JP Morgan, wow, a US bank that is in the middle of all the current financial mess. So, that means that we are ‘stress-testing’ the fact that the US economy is about to collapse and we are right in the middle of the s#*@ storm! Our Treasurer Wayne Swan has been misleading the Australian people and his head should be the first to roll, closely followed by our little orange headed JuLIAR Gillard.

  • Rick Alexander

    Oops (a big oops), I forgot to give the people of Australia some timely advice; RUN TO THE BANK AND GET YOUR MONEY WHILE YOU CAN, RUN, DAMMIT, RUN !!!!!!!!!!!!!!!!!! Now that should freak out our Treasurer.

  • Paul Wallis

    “Government-run media”, Mr. Alexander? Who elected Rupert Murdoch?

    Meanwhile back on the subject- Moodys just confirmed our AAA rating. $87bn is small beer for us these days (Our super fund holdings alone are many multiples of that), but the knock on effect of market panic would be a big hit short term and would obviously affect the credit cycle.

    That said, APRA is a government agency which cops a lot of flak regularly for its lack of input into its own sector and dilapidated regulatory practices. If it’s finally got something right for once, it’d be a first.

  • True Christians

    What did you expect? It is just the next part of the SAME scenario – setting chaos, crisis and wars all over, i.e. preparing the entire world for resignedly accepting a “New World Order” with ONE government and ONE president – known as “anti-Christ”.

    After the rest of the survived ones are totally fed up of all these disasters they will be completely ready to accept anti-Christ as their “Savior” but will stay blind to realise that he is THAT fake “Savior” of course. Unfortunately, most of the mankind WILL accept him, except of the small number of true Christians.

    Read the Holy Bible and watch the signs of today. And make YOUR choice today because tomorrow will be too late. Almost NO time is left.

    • I have to agree with your comments those who don’t know about the bible and the sign of what’s going on will have the shock of their life specially if they put all their trust in men in government instead of God will have the shock of their life…..we are living in a very dangerous time only our Faith in God will allow us to survive

  • Atlantic

    Angela Merkel will probably still insist EU immigrate another 20 or30 million Niggers and Muzzies into EU. No money, HIV, Tuberculosis, Angela doesnt seem to care. Another 50 million “asylum” seekers under cover of “UN asylum treaty” bringing TB into EU doesnt seem to worry Angela.

  • Rick Alexander

    Paul Wallis, my apologies for not being specific – but by Government media I meant their lapdogs – The Australian, Fin Review and the ABC (remember McEwan???)

    Now on Europe;

    Lagarde is not in the real world and there is no single voice in Europe. England is not interested in debt, France produces very little except tourism and wine (and that is declining) and Germany has the gold and manufacturing brains but is not going to share it with the faltering economies of Italy, Greece and Spain. What Lagarde should propose is a new credit rating for the whole world as follows; AAAAAA+++ and AAABBB+++ and BBBCCC+++, that way it will be a whole hundred and fifty years before you lose all the +++++’s and then the A’s and AB’s and BC’s before anyone realises that you are broke.

    THe game is up and countries need to get back to work and produce goods not stupid Carbon Clouds, Retirement Entitlements and Solar Panels – and stop hugging trees. Now this may all be an Inconvenient Truth, but it is the truth.

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