Brexit Is a Lehman Moment for European Banks

Re:Brexit Is a Lehman Moment for European Banks by cm2187 on Sunday July 10, 2016 @10:54AM (#12065761)

The guy who wrote that article is such an idiot. A reducing market capitalisation is not "shrinking the banks". It might mean the banks may be making less profits, but that doesn't make them safer, rather more dangerous on the contrary (as they can't climb their way out of a loss through earnings). Shrinking a bank means reducing its balance sheet, its leverage not its share price.

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Re:Brexit Is a Lehman Moment for European Banks by hacknat on Sunday July 10, 2016 @11:38AM (#12065927)

Totally, especially with leverage and a large notional insurance/derivitives liability. If reality moves in the wrong direction against that insurance and there's nothing but debt at the end to the payees, then too-big-to-fail cascade effects, ala late 2007, happen in the system again. This is why derivitives should be heavily regulated.

IMO, even the most libertarian government would not allow a normal insurance company take on so much leveraged potential liability without at least a disclosure to the consumer that says, "Hey, this company probably can't payout the policy you just bought from them." Yet somehow it's okay for financial instruments? IMO, Dodd-Frank should have forced financial institutions to calculate their overall liability on derivitives as part of their capital requirements. This would never happen though, as they trade so rapidly most banks probably don't even know at any given time what would happen to their derivitives liability if the market swung wildly, either up or down.

We're going to have another 2007 again, for sure. I have no idea when, but we did not solve the underlying problem at all.

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Re:Brexit Is a Lehman Moment for European Banks by atmosx on Sunday July 10, 2016 @12:54PM (#12066202)

> This would never happen though, as they trade so rapidly most banks probably don't even know at any given time what would happen to their derivitives liability if the market swung wildly, either up or down.

I think the technology is there to make it happen automatically. It's a deterministic system. The problem is the lack of political will to do so, which is appalling and leads to situations like Brexit and Trump.

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Re:Brexit Is a Lehman Moment for European Banks by SixSigma on Monday July 11, 2016 @03:06AM (#12069339)

Situations where people realise they have been decieved and decide to do something about it?

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Re:Brexit Is a Lehman Moment for European Banks by atmosx on Monday July 11, 2016 @05:13AM (#12069820)

Exactly.

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