Chillin' out till it needs to be funded
Even as regulatory costs become part of a banking brand makeover especially in Big Bad London which is also holding out on Europe, the momenutum for credit has caught on with banks in the last fe months, giving a positive makeover to the RWA number that had been spiralling down with Banks like BNP avoiding Greek debt and Deutsche now being waylaid by its wholesale funding holdings. JP Morgan’s battles witht he same Wholesale funding have been steep but the bank is away ahead of its European peers minting on the Euro trades in currency and structured derivatives calls ont he continent in the euphoria in the second half of 2012.
This Friday’s Economic updates pointing to a trifecta for the recession in the UK or the slowdown in New home sales in the US are more a small bump which will be smoothed over in the later data one believes, especially with regards to the UK recession as long as it climbs the Political parapets and avoids any unlikely redenomination in the Continent’s trade despite Italian elections, a banking union it must avoid and even more as the German Bundesbank and the Swedish government are on its side in the very least and the French are not much in a position to tarry though they would much like to.
Given the likely transient nature of these hiccups except for Deutsche Bank and the new 1.35 highs for the Euro ( which are also likely topped off) the talks of a British recession and its currency’s downward move are unlikely to compete with the barelling yen that has likely cleared the path to Dollar parity and positiveinterest rates if the inflation target is met seriously even as Domestic business continues to look outward than to local demand. The Euro’s lead might correct in the next few weeks to a more moderated ramp and a top of around this mark (1.35) but more fortunately for the Economies budgeting zero deficit ( or near that) 2013 finances , the banks have finally yielded to the improving ( is to be read as slackening ) of the regulatory environment and started returning the interest free ECB loans issued by the European Super Bank in 2011
278 banks are coming forward with repayment schedules that converge on January 30, and is nearly 30% of the EUR 489 bln in LTRO loans raised in the first instance, at EUR 137 bln, revisions to the number unlikely further as banks can change their intentions only once a week. in the bigger picture of course, it is merely the cutting of the logjam of deposits at the Central Bank but still that banks are so willing to no longer leave the money on deposit and return t to the Central Bank shows they have the means and viable assessments from the competition that show their employees that they have to start earning positive returns available in the market including credit and trade in financial assets that had become a pile of backlog after the Greek sovereign bonds defaulted and haircuts cut off the capital supply to many financial intermediaries including banks.