Friday, Jun 05, 2009
Contagion increase
Telegraph: European banks in spotlight as Baltic crisis hits Sweden
*
comments
*
Czech Republic joins East Europe's falling dominoes
Swedish banks have lent more than $75bn (£46bn) to Latvia, Lithuania and Estonia, led by Swedbank and SEB.
Hakan Berg, Swedbank's head of operations in the Baltics, said his bank can cope with the shock losses from devaluations across the region. "We have tested the worst-case scenarios. We have adequate capital. It would not bring the bank down," he said.
The dramatic situation in Latvia went from bad to worse on Thursday as overnight rates reached 140pc, a sign that the country's currency peg in Europe's Exchange Mechanism is close to snapping. Credit default swaps measuring risk on Latvian debt rocketed above 750 after Latvia's treasury failed to sell a single note at a $100bn debt auction on Weds.
7 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. devo said...
Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.
Charles Mackay
2. happy mondays said...
Mankind is notoriously too dense to read the signs that god sends them from time to time. We require drums to be beaten into our ears, before we would wake from our trance and hear the warning...
Mahatma Gandhi
3. mr g said...
If the comments @ 1 & 2 are too deep and meaningful for you, don't worry, Big Brother is back this weekend!!
4. uncle tom said...
To put some rough numbers on this, the 7 million inhabitants of the Baltic states owe the Swedes around three times their combined annual salaries - presumably they are also in hock to several other countries as well, so their ability to pay their debts has to be extremely doubtful.
Assume they adopt the Argentina solution and cut their liabilities in half, by re-denominating their debts and devaluing. That leaves the Swedes nursing a loss of £23bn - or roughly £6k for every Swedish household.
That's bad - very bad, and it's only one facet of a problem that embraces the whole of the former soviet bloc and the misguided western banks who lent to them.
No-one seems to have any clear idea what the UK exposure is - we ought be told more..
5. britishblue said...
Uncle Tom @ 4. Not sure how the UK is exposed in terms of commercial debt to eastern Europe, but with regards to domestic debt I believe it is very little.
When I looked for mortage financing in Poland two years ago on and exisiting property I had owned for six years, I did the rounds with all the banks there and spent months researching the options. I could borrow in Swiss Franc, the zloty or the Euro. The local banks weren't providing the finance, it was either by the Swiss or the Irish. No financing was available at all from the UK either from within the UK or within Poland. This was also on a very low risk loan where only 25% loan was needed and there were no borrowings on the existing house. Poland was one of the first of the eastern bloc to welcome foreign lending and is also the largest of the countries there, so I think it is highly unlikely that the UK is heavily exposed to other countries like Latvia. If you look where these countries sit on a map with regards to both Sweden and Germany, it makes a lot more sense as to why they grabbed this toxic market share rather than the UK.
I have no idea if the situation is different for commercial lending, but if the UK were heavily exposed I think it would have been pointed out by the like of Ambrise Evans Pritchard at the Telegraph.
6. uncle tom said...
BB,
Thanks for that - interesting to hear that the Irish were dabbling..
..it does seem that countries with smaller populations are tending to be at the focus of these problems, both as lenders and borrowers..
7. peeping tom said...
Although Ambrose is a Eurosceptic, articles like this make it more likely that the Euro will become the de facto of Eastern Europe sooner rather than later as those with savings are hardly likely to keep them in the local currency. Of course one could adopt the same argument for the UK. If Cameron gets a large Tory majority at the general election he could afford to dispense with the Eurosceptic wing and negotiate British entry into the Euro at a rate of about 80p/Euro.