Now Banks Don't Even Trust One Another!

Just want to show you how serious the financial markets worldwide is, banks doesn't want to lent money among themselves. So far the entire crisis developing before our naked eyes majority of the banks currently are having crisis of confidence not only to normal lending facilities but also worry of counter parties risk when lending among themselves. Did the US650billion pump into the financial market by the Feds through or coincides with other worldwide central banker will provide the magic to unshackled the capital market? If we look closely all the pumping it's absolved by the majority of banker but they didn't lent it out, fear of counter parties risk and consumers ability to borrow and repay stock the financial market.

As someone said the banking sector or industries currently didn't have liquidity problems but solvency problems! It's the banking still solvent? Having lost US600billion up to today from the current derivatives crisis and unassure futures losses, solvency it's the biggest headache. Europe just nationalised two banks in the last 48hours; Fortis in Europe and B&B in England. Read the below cut out article :-

By Simone Meier
Sept. 30 (Bloomberg) -- Demand for cash from the European Central Bank soared as the global credit crisis deepened and banks stopped lending to each other.

The ECB today lent banks 190 billion euros ($273 billion) for seven days after initially estimating it needed to drain 40 billion euros from the system. Demand for dollars in Europe also surged, forcing the ECB to announce an additional auction of $50 billion in one-day funds. It lent $30 billion earlier at a marginal rate of 11 percent, almost six times the Federal Reserve's 2 percent benchmark interest rate. Banks had asked for $77.3 billion.

``The ECB is the only port of call at the moment,'' said Stefan Bielmeier, an economist at Deutsche Bank AG in Frankfurt. ``The money market is barely working. Central banks are increasingly playing the role of a clearing house.'' ``Funding markets are in complete disarray, central banks are unable to get banks to lend to one another, not to mention the outside world,'' said Christoph Rieger, a fixed-income strategist at Dresdner Kleinwort in Frankfurt. The flow of credit will be seriously impaired for some time.''

London interbank offered rate, or Libor, that banks charge each other for loans climbed 431 basis points to an all-time high of 6.88 percent today, the British Bankers' Association said.
The euro interbank offered rate, or Euribor, for one-month loans climbed to record 5.05 percent, the European Banking Federation said. The Libor-OIS spread, a gauge of the scarcity of cash, advanced to a record.

How we know banks don't trust one another? Well look at the inter banks offered rate (Libor), 6.88 percent today in England and 5.05 in Europe!

Big time banker is hoarding cash, if bank don't even trust their own peers who do they trust? Hard time is upon the financial market be prepare for the next six months or so they will be a lots of fireworks to see.

Buy gold ........................ definitely you didn't have counter parties headache.





Disclaimer/Comments Policy.