As Asia wakes up on Monday morning, and as Chinese markets start trading, the world markets and more specifically bankers are on tenterhooks.
Banks have had risks coming
their way for some time. Credit risks took them the NPA express way and
along the stressed assets on a rapidly converging highway .
This toxicity in credit has severely impacted
profitability of banks. Consequential risks point to a structural mismatch that
would have affected or are affecting banks' overall future assets and
liabilities.
The mismatch(es) will
affect throughout not just on credit but on liquidity,
interest, and currency too. Strategic balance sheet management seems
quite a difficult task for banks in this scenario.
Current setting stares at the likelihood
of liquidity risk in the forthcoming weeks. Liquidity risk will see
discriminatory and burdensome interest rate risks which banks will find
rather difficult. With asset prices falling, trading risk management is made
even more tricky.
Funding and capital planning of
not just banks but countries (think of the income slack Gulf countries trying
to sell assets to meet developmental needs in a falling market!) will be
adversely impacted. There can be little profit planning and growth projections
for banks in the near short run. Rapid strategic exercises are called
for.
Banks are but dinosaurs ?...
The views expressed are
without any risk or responsibility. The blog recommends no investment.
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