Friday, 14 October 2011

2012 - The Liikanen-Mayan Forecast


In a hearing with the Finnish Parliament, Liikanen (Bank of Finland) stated that global economic growth for late 2011 and early 2012 was falling behind this summer’s projections. Liikanen emphasized that banks now need to preserve their own liquidity, securing additional capital from private sources.


to me it looks like Liikanen is telling to banks to get ready for the worse...

6 comments:

Anonymous said...

Well OP-Pohjola has had its credit ratings downgraded by Fitch: "OP Pohjola goup and Pohjola’s long term credit rating is now AA-, while short term lending is now rated as F1+."

http://www.yle.fi/uutiset/news/2011/10/op_pohjola_downgraded_by_fitch_2949449.html

According to a chart in the Kauppalehti (21.9.2011) Pohjola has a loan to savings ratio of 195%, and Noidea has one of 177%. Ie. loaning out much, much more than they have in deposits so needing to borrow from other financial institutions.

Will the downgrades and bad loan/deposit ratios force a decrease in lending, and so help lead to hosuing price falls in the near future?

"island Crow"

HousingFinland said...

Thanks Island crow, that's a very interesting news.

I saw that banks start to chase customer's savings and try to lock it up through any type of instruments - I guess they a´have restlessly lent which explains the irrational exuberance of the Finnish housing market.

My worries will be a long and slow readjustment i.e 2% inflation adjusted decline per year for 20 years...so price will half but in a very slow motion... I prefer the Finnish 1990 scenario or the US 2008 scenario, a sharp but rational adjustment without socialism type direct or indirect state/political intervention.

Also, Nordea and Sampo seems to have been working to unite themselves. So at some point, it will happen when we will be again in the eye of the storm (between 4 weeks - 1 year).

To me it looks like Finland has learned nothing from the 1990 crisis. 98% of people's housing mortgages are on variable rates, also highly leveraged (up to 7-10 time their income), within a non regulated housing practices (housing company loan, rented land ...) and shadow regulators that have been nothing but useless in the past 2 decades.

So when it will implodes, it will really get ugly, and Timo Soini- the true thin leader- is aware of it and has been preparing his troop accordingly...unfortunately for Finland, at some point it could fall back to the dark ages...who knows...

Balmat said...

Very interesting post "island Crow"
I am wondering what has been the evolution of the CDS Spread for the Nordic Banks ... and Nordea in particular ...
I found the following ... the market seems to not see Nordea as the riskiest bank so far in the nordics ... see CDS Spread page 4
http://danskeresearch.danskebank.com/Link/WeeklyCreditUpdate/$file/WeeklyCreditUpdate.pdf

But they had quite a big increase in just few month ...

Could be interesting to follow what will happen to Danske and Swedbank ...

But I recommend you to read the following ... excellent ...

http://www.finanssivalvonta.fi/fi/Tiedotteet/Esitelmat/Documents/Anneli_Tuominen_260811.pdf
Page 11 summarizes pretty well the current situation ...

HousingFinland said...

"Raimo Sailas, the permanent secretary at the Finnish finance ministry, was quoted as saying by local paper Iisalmen Sanomat on Saturday that Finland faced its worst economic crisis since the second world war."

Interesting especially when you heard thatthe worst was behind us or that the banks performed well in the past stress tests ....

Andrew said...

low loan to deposit ratios are fairly meaningless for new bank lending if the ECB is providing unlimited liquidity and is also putting in place new covered bond programs

The ECB is the bankers bank.

However the ECB is now sending mixed messages.

But importantly the main activist in ensuring the ECB does as the banks want is Deutsche bank. And soon Dragi the head of the private bank of italy will be head of the ECB

So it is a given that whatever happens to the European economy it will be arranged that asset prices are enormously supported via monetary policy to the benefit of Germany and probably france too and for that matter Italy.

Covered bonds are for example a traditional part of the mix in European banks.

A covered bond is just a first ranking secured deposit for rich folks who would not be covered by the lower amounts of deposit insurance.

So if you look in the accounts what do they actually tell you?

Ultimately the ECB and its various spokespeople are talking out of both side of their mouth at the same time to speak to different audiences

Influencial Germans for example, who are renting and have some notion they are part of a society of people working together, want to hear that the ECB is working for them rather than working to save the German and European banking system where screwing savers is an important part of monetary policy.

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