by Gene Kirsch, Senior Bank Analyst
Banks are the financial core of an economy. And for many of the world’s banks, it is truly the worst of times. They’re woefully short of capital. They’re buried under debts they can’t pay back. And, they’re facing a chronic on-again-off-again global slowdown.
Some are up to their eyeballs in sovereign debts — securities whose values are dropping like rocks. And for lifelines, they’re relying more and more on the whims of central bankers and politicians.
No wonder investors are fearful of failures by foreign banks. And, no wonder investors are skeptical of the promise European governments have made to stand behind their banks when they may not have the financial firepower to do so.
With the complex web of today’s financial markets, it is no longer wise to ignore what’s happening outside our own sovereign borders. We have to question whether the bank we do business with is connected to a bank in Spain or Italy … and, whether that bank is financially healthy.
So, if you own stocks or bonds issued by vulnerable institutions … keep your money on deposit with them … or rely on them to help fund your business investments or consumer purchases … now is not a good time to take your eye off the ball. The potential for losses are staggering, and the list of potential casualties is long.
At the same time, a select few global banking institutions are poised to prosper with strong balance sheets and good liquidity.
And, if you are an astute and agile investor, you might just find profit in a market mismatch or institution flaw.
From either viewpoint, foreign banks, once considered mere blips on the U.S. radar, now deserve much closer scrutiny.
Of the 43 countries and 206 banks covered in the soon-to-be released Weiss global bank ratings, the countries with the highest percentage of weak banks are Germany, Greece, Italy, and Spain. Let’s take a closer look …
