ITALY: Bank of Italy warns on growth as bond sale falters -- Reuters
EURO BANKS 1:
WSJ article (need login, but even if you don't the key point is above the login): In a 54-page report sent to hundreds of Goldman's institutional clients dated Aug. 16, Alan Brazil—a Goldman strategist who sits on the firm's trading desk—argued that as much as $1 trillion in capital may be needed to shore up European banks; that small businesses in the U.S., a past driver of job production, are still languishing; and that China's growth may not be sustainable.
EURO BANKS 2:
Business Insider article: The Latest on the funding situation at European Banks:
"Regardless of the actual liabilities of these banks, it is doubtful any of them could have planned for this sudden drop in equity. At the same time, earnings aren't picking up the slack. Add that to new fears that the Greek bailout will not go through quickly enough to save Greece from a full-blown default (no selectivity) and the ensuing contagion risks.
The real wild card here is the European Central Bank. It could provide virtually unlimited funds to these banks, but their balance sheets have to be strong enough to qualify for lending. This should not be a problem in France and Germany, but the longer it takes to come out with a viable solution to this crisis, the more likely this problem could be."
LIBOR RISE: Finally, a nice Chart from
Business Insider about
LIBOR rates
Major banks on both sides of the Atlantic are self-reporting higher and higher interbank USD borrowing rates, meaning that funding is getting more expensive in a hurry.
This graph from ZeroHedge demonstrates a sharp rise in the 3-month USD LIBOR -- a benchmark interest rate for short-term borrowing of U.S. dollars -- over the last two months. Every bank detailed saw an increase in its short-term borrowing costs.
Reuters reports that European banks are paying slightly more than the fixed LIBOR rate while U.S. banks slightly less. On the whole, 3-month rates are at their highest since last August.
We keep talking about signs that the funding situation for eurozone banks is going downhill, and this looks like the newest sign that dollars are becoming increasingly expensive. Rising borrowing costs could provoke a credit crunch that would lead to another global slowdown.
