Banks : Stock-ing Fillers

Want to know what to invest in with your hard-earned cash at the start of this year before the markets take a plunge? Banks! European banks to boot! Bank stocks are set to rally by up to 35% this year alone, before they probably take a nose-dive for the worse and end up bringing the markets around the world down. 2014 is the year for an upturn that will see the bubble bankers blown out of all proportion. The markets are already over-inflated, but this is like nothing that you’ve seen before, or at least not for some time.

Rally

We haven’t seen highs like this in the banking sector since April 2011 as banks and financial institutions rallied today. Some are saying that it’s the good credit quality and the progress on a banking union that is being made. This is having an apparent knock -on effect on loans being granted and the economy is finally taking an upturn for the better. Who would have thought that the European banking sector was going to get back on its feet?

However, if you believe that then you are living either next to Noddy in Cloud-Cuckoo Land or Big Ears is your Uncle.

Market Rally on Easing of Basel III

Market Rally on Easing of Basel III

Interest rates might be the lowest they have been for years now, but that’s only because the European Union and the European Central Bank has its knees knocking together as deflation rears its ugly head just around the next boulevard. The real reason is that the banks have finally got their own way. Or at least, they got some way to getting exactly what they wanted.

European banks have surged today as the news was announced that they can have more flexibility with lending requirements. Isn’t that tantamount to lending when and where you want rather than checking that it is a bona fide solvable borrower that is behind it all? Of course, when it comes to making a quick buck, there’s no need to worry that the cards might come crashing to the ground. Remember they were too big to fail. Now, they know that they are too big to fail. Now, they know they can do exactly as they choose. Oh! The power of it all; goes straight to your head quicker than the bubbles in the fizz.

Basel III

Basel III has been watered down and the bitter pill will be easier to swallow now for the banksters around the world.

Basel III included the controversial rules that were meant to stop overreliance on debt by the banks; and at the same time protect the rest of us as the banks played with our money. The banks cried, the banks fretted, the banks finally won hand over a fist full of dollars and Basel gave in. They said they would never in a million years be able to raise the capital that was being asked of them to meet the requirements to cover debt.

The requirement for the international standard of leverage ratio will increase from today’s 3.8% requirement to just over 4%. None of this will take effect until 2018, but the markets have shown a strong rally today. Of course, who would miss out on what Basel III being changed means to the financial system?

The banks will be spared now the raising of billions in liquidity over the next few years. The changes were announced late last night in Switzerland. The press statement issued by the Bank for International Settlements, and the Basel III Committee said in a press statement: “The Committee agreed to modify the LCR’s definition of HQLA (High Quality Liquid Assets) to provide greater use of Committed Liquidity Facilities (CLFs) provided by central banks. The use of CLFs within the LCR has until now been limited to those jurisdictions with insufficient HQLA to meet the needs of the banking system.

Of course the banks have now promised to maintain the flow of capital and lending. Hip hip hurrah! We have been saved thanks to the ingenious efforts of the Basel III boys. Well, let’s wait and see, before we start getting out the bunting and rejoicing at what was in essence the problem of the banks at the very beginning.

The Basel Committee caved in as the banks said that it would be detrimental to the economy and they would inevitably curtail lending if they had to hold capital as a percentage of all assets.

The news will come as a stock-ing-filler that will warm the cockles of your financial hearts; and it’s only just the New Year. There are some that take resolutions, and very few that actually stick to them. Then, there are those that don’t bother to delude themselves these days. Why set out a resolution if you aren’t going to stick to it? I think you’ll get the gist.

The FTSE 300 (European index of blue-chip companies) might have fallen overall by 0.5 today but the banking sub-index increased by 1%. Crédit Agricole rose by 3.5% and Natixis rallied by 5%. BNP Paribas which has one of the weakest liquidity coverage ratios rose by 1.9%. Société Générale is in the same case and also rose by 2.7%.

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tothetick

Professional team of writers/analysts analyzing the financial markets.

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