....AIG's last annual report reveals that it had written coverage for more
than $300bn of credit insurance for European banks. The comment by AIG
itself on these positions was that they were "for the purpose of providing
them with regulatory capital relief rather than risk mitigation in exchange
for a minimum guaranteed fee". Thus, a formal default by AIG would have
exposed European banks to large increases in regulatory capital
requirements, with possibly devastating effects on their ratings and market
confidence. Thus, the US Treasury has saved, inter alia, the European
banking system.

The extent of regulatory arbitrage can also be seen in the very large gap
between overall leverage ratios and the official regulatory ratios. The
dozen largest European banks have now, on average, an overall leverage ratio
(shareholders' equity to total assets) of 35, which has actually increased
so far this year, compared with less than 20 for the largest US banks. But
at the same time most large European banks also report regulatory leverage
ratios of close to 10. This is partly due to the fact that the massive
in-house investment banking operations of European banks are subject only to
limited regulatory capital requirements. Another part of the explanation
must be regulatory arbitrage, for example, through the credit insurance
offered by AIG.

Europe's banks will benefit greatly from the effective nationalisation of
the US financial system now being planned, because the larger ones, which
all have significant US operations will also benefit from the $700bn
bail-out fund. But it remains unclear how many of these assets they still
hold in their balance sheets and how volatile their liability base will
prove if confidence does not return quickly.

The crucial problem on this side of the Atlantic is that the largest
European banks have become not only too big to fail, but also too big to be
saved. For example, the total liabilities of Deutsche Bank (leverage ratio
over 50!) amount to about ?2,000bn (more than Fannie Mae) or more than 80
per cent of the gross domestic product of Germany. This is simply too much
for the Bundesbank or even the German state, given that the German budget is
bound by the rules of the European Union's stability pact and the German
government cannot order (unlike the US Treasury) its central bank to issue
more currency. Similarly, the total liabilities of Barclays of around
£1,300bn (leverage ratio 60!) are roughly equivalent to the GDP of the UK.
Fortis bank has a leverage ratio of "only" 33, but its liabilities are three
times the GDP of its home country of Belgium.

With banks that have outgrown their home turf, national treasuries and
regulators in Europe are living on borrowed time: they cannot simply develop
"road maps" (the only result of various Ecofin discussions of regulatory
reform by finance ministers), but must contemplate a worst-case scenario.


Given that solutions for the largest institutions can no longer be found at
the national level it is apparent that the European Central Bank will need
to be put in charge as it is the only institution that can issue unlimited
amounts of a global reserve currency. The authorities in the UK and
Switzerland - which cannot rely on the ECB - can only pray that no accident
happens to the giants they have in their own garden.

Daniel Gross is director of the Centre for European Policy Studies in
Brussels. Stefano Micossi is director of Assonime, a business association
and think-tank in Rome

Se Deutsche Bank o una mega banca svizzera o inglese (le più esposte) o una
francese con la recessione che è iniziata in europa e il cedimento degli
immobili un poco anche da noi finisce nei guai in Europa è impossibile
mettere d'accordo e trovare l'autorità per salvarla a livello UE e salta
l'europa. Solo l'America al momento può improvvisare una mega operazione di
salvataggio in cui si crea una domanda per questi asset pericolosi con
denaro statale. In europa anche essendo convinti che sia necessario mancano
le leggi necessarie e si tratta di mettere d'accordo una dozzina di paesi

Anche dall'europa oggi e domani tutti guardano con ansia se i deputati
americani votano i 700 miliardi

Il /24 set 2008/, *il germe napuligno* ha scritto:
> con denaro statale. In europa anche essendo convinti che sia
> necessario mancano le leggi necessarie e si tratta di mettere
> d'accordo una dozzina di paesi
Che l'europa fallisca non mi meraviglierebbe, ma qello che non si è
capito è che i 700mld di USD sono una manna del cielo per le banche
europee, sopratutto quelle sovra esposte.
In pratica, se la cosa va in porto ed è probabile, questi soldi
serviranno a far sì che le banche europee vengano salvate proprio da
questo disennato piano di salvataggio.