Fitch's estimate of $566B in additional capital needs for the world's largest banks is likely to...


Fitch's estimate of $566B in additional capital needs for the world's largest banks is likely to create a tradeoff for the lenders. A better capitalization ratio could lead to lower risk premiums, but more capital means ROE will suffer, maybe by more than 20%, thus reducing the bank's ability to attract investment.
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Comments (3)
  • davidingeorgia
    , contributor
    Comments (2661) | Send Message
     
    So, if this is actually true (and I'm sure not saying it is, given the source), does that mean that all those "stress test" results announced with such fanfare (American banks are just fine is the basic message I remember hearing) were all just BS/PR? And yet they wonder why investor (at least retail investors) confidence is so low?
    17 May 2012, 08:01 AM Reply Like
  • Tack
    , contributor
    Comments (16502) | Send Message
     
    The politically-populist preoccupation with having banks hold massive reserves, while simultaneously not making any investments not approved by a government school marm, will, if enforced, simply maintain years of stagnant global economic growth. Economies simply cannot grow without both robust and active banks, and that includes some risk.

     

    We seem to live in an age where making everything 100% "safe" is life's goal, without regard to other unintended consequences. I suggest we simply accelerate directly to the logical endpoint: you are confined by law to your bed, where you huddle under the covers and receive your daily government-approved sterilized meal.
    17 May 2012, 08:29 AM Reply Like
  • BlueOkie
    , contributor
    Comments (10638) | Send Message
     
    Would like to see a breakdown of the $566B.
    17 May 2012, 08:33 AM Reply Like
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