UK banks just got what many economists here in the US have argued for: a recapitalization of major institutions paired with equity stakes in those entities that accept it.
The market reaction prior to the global coordinated rate cut was mixed, except for one possible bright spot: CDS spreads on British Banks declined.
An anonymous One Credit trader told Reuters:
The first thing I did was email my colleagues at Barclays (BCS) and RBS (RBS) to congratulate them on being civil servants now.
Meanwhile J.P. Morgan analysts said the package -- which at $87 billion is roughly comparable to the US $700 billion bailout in terms of percentage of country GDP -- should "remove systemic risk and create a more resilient banking system, but not necessarily one that is more profitable."
That last part is something we'll be hearing a lot more of.
