Monday, March 16, 2009

Why European Banks are in Trouble...

The chart below shows the size of global capital markets in relation to the GDP leading up to the crisis. What's clear is that bank assets were a much greater percent of GDP in the EU than in the United States, explaining (along with currency issues) why the EU has been hit especially hard.

On the bright side... the U.S. is in "relatively" good shape.

Source: IMF


  1. I don't think that plot is very informative. There are banks in Europe with assets 400% of GDP. That is a more relevant statistic.

  2. Does this also mean that USD is looking up? Further up?

  3. david- obviously it is not a ton of detail, but i provided the link to all the data. find me the goods and i'll post.

    NO2- i personally would agree with david that the chart doesn't show a heck of a lot besides that at a 20,000 foot view the U.S. banking can be saved easier than the European banking system. whether that means nationalization, recovery, or something in between is too dependent on policy decisions over the next few weeks to make a guess...

  4. The problems was more in debt securities, so the US is worse of ?!

    Secundo: the size of the assets is one thing, the quality of the assets is something else.

    So the chart does not say anything without more information about some other characteristics.

  5. Check the scale specified on your chart. It's not percent of GDP, its the ratio of the asset value to GDP. Or multiply the scale by 100 to actually make it the percent of GDP. Nos. much larger than chart implies.