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Banks Face $5.8 Trillion Rollover by 2012

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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jun-29-10 11:37 PM
Original message
Banks Face $5.8 Trillion Rollover by 2012
Edited on Wed Jun-30-10 12:27 AM by girl gone mad
Banks Face $5.8 Trillion Rollover by 2012

This Sydney Morning Herald story (hat tip reader Gordon) not only points out the magnitude of the financing needs of major banks over the next few years, a daunting $5.8 trillion, and also points out that US and European bank refinancings are falling short of their rollover calendar. This suggests that we may witness a combination of balance sheet shrinkage and more covert and overt funding support.

From the Sydney Morning Herald:

    Banks around the world must refinance more than $US5 trillion ($5.8 trillion) of debt in the coming three years, a massive rollover that poses threats to financial stability and growth.

    The need to replace these funds, which are medium and long term, will place pressure on bank profit spreads and in turn may either prompt deleveraging, where banks sell assets that they can no longer economically finance, or simply lead to a bout of credit rationing, where borrowers must pay more to borrow, thus crimping investment and economic growth

    US banks have issued $US230 billion of debt in the first five months of the year, about 60 per cent of the rate they need to achieve over the three year period. Euro zone banks have issued $US133 billion, or about 70 per cent of their needed run rate.

    One easy to see consequence is that, all things being equal, the cost for banks to issue debt should rise, as should competition among banks for consumer deposits. It is possible that a global desire to save more helps to blunt this effect, but even so the macroeconomic effect and the effect on asset prices will both be strongly downward.

The Bank of England June 2010 Financial Stability Report gives a more detailed breakdown:

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Skink Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jun-30-10 12:07 AM
Response to Original message
1. financial crisis part two.
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inna Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jun-30-10 03:09 AM
Response to Original message
2. Appetite for Destruction
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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jun-30-10 03:44 AM
Response to Reply #2
3. Feels like we're past the point of no return.
There is no policy of mutually assured destruction to contain the unending greed of the financial engineers and vigilantes who are annihilating national economies. There is no plan to stop them, little courage in the hearts of our leaders. In the end, it will be up to us to bring the 'too big to fail' banks down.
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Name removed Donating Member (0 posts) Send PM | Profile | Ignore Wed Jun-30-10 04:22 AM
Response to Reply #3
4. Deleted message
Message removed by moderator.
girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jun-30-10 06:07 AM
Response to Reply #2
6. I have no idea why your post above was deleted..
Edited on Wed Jun-30-10 06:07 AM by girl gone mad
but I did read it and I appreciated it.

Maybe the mods are a little trigger happy lately?

I hope you take time to enjoy the important things in life. It's about to get tougher, but we will keep fighting. :)
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jtuck004 Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jun-30-10 04:54 AM
Response to Original message
5. Interesting time to be a bank.

So they got some money borrowed at 2-3%, loaned it out at 6, now have to refinance it at 9.

And any hard real estate assets involved with this are very likely marked-to-myth.

And this drives up prices and squeezes our ability to grow business.

That's some really bad news, because money put in to grow the economy could simply be sucked up into this
with no return, I think.
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Joanne98 Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jun-30-10 08:21 AM
Response to Original message
7. Zero Hedge saz it's 15 trillion.

Submitted by Tyler Durden on 11/10/2009 15:06 -0500

Zero Hedge recently highlighted the developing risk in the government's outstanding Treasury portfolio, where nearly 40% of all issues mature within the year. As such the roll risk for the US government is massive, and even the smallest unexpected macro blip would make the rolling/refinancing of roughly $5 trillion in debt very problematic. Yet the US government is not alone in this quandary of how to keep T-Bill interest rates at record lows: an earlier report by Moody's demonstrates that the banking system is in far, far worse shape: "we note that average maturities of new debt issuances rated by Moodys which we use as an indicator of general trends -- fell from 7.2 years to 4.7 years globally over the last five years. This is the shortest average maturity for new debt at any given point during the 30 years of bank funding history covered by our analysis. As a related matter, we estimate that banks that we rate will face maturing debt of about $10 trillion between now and the end of 2015, $7 trillion of which will occur by the end of 2012."

Let's do the math: the US Gov't needs to roll about $3 trillion (and increasing) every year, Commercial Real Estate has a $3 trillion refi cliff around 2014 and the banking system has a $7 trillion roll maturity by 2012. In other words at or about 2012, or at the time Barack Obama is sure to be enjoying record approval ratings (high or low, your choice) courtesy of 30% unemployment, the American economy will be straddled with not just the ongoing burden of issuing about $2 trillion in debt each year to finance what can only be characterized as a budget concocted by the most hard-core, raving lunatics in the Federal Insane Asylum Reserve, but will have to deal with roughly $15 trillion of rolling maturities.
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