I was recently told by someone in the finance world that when it comes to banks capital is less important than funding structure. A bank with long-term funding in place can conduct operations and make money. If not, then not. So how’s it looking for Europe’s banks?
Morgan Stanley, for example, calculates that of the €8,000bn funding that is currently in place for the largest 91 eurozone banks, some 58 per cent needs to be rolled over in the next two years. More startling still, some 47 per cent of this funding is less than a year in duration. Much of that is in euros.
Gulp. My view is that German elected officials are making increasingly unreasonable statements in part because the ineluctable reality that one way or the other they’re going to have to eat losses is closing in on them.