Keep an eye on Italy...
Ratings agency Moody's has cut the credit ratings on 26 Italian banks, including Italy's largest lenders Unicredit and Intesa Sanpaolo.
Italy's economy is contracting while the government also tries to reform the nation's public sector.
The agency said the banks were increasingly vulnerable to Italy's recession and the effects of government austerity measures.
Ten banks were cut from investment grade to so-called junk status.
UniCredit and Intesa Sanpaolo account for a third of the Italian banking market by assets. They both had their ratings cut, to A3 from A2, the agency said.
Some of the other banks saw their ratings cut by as much as four notches.
All of the banks were also put on negative credit watch, meaning that further downgrades are possible.
'Lowest in Europe'
"The ratings for Italian banks are now amongst the lowest within advanced European countries, reflecting these banks' susceptibility to the adverse operating environments in Italy and Europe," Moody's said in a statement.
"Banks are vulnerable to the renewed recession in Italy, given their already elevated levels of problem loans and weakened profitability," it added.
Prime Minister Mario Monti is trying to implement a programme of austerity and reform, including changes to pensions, tax rises, fuel price increases and the liberalisation of some professions.
After years of stagnant growth, Italy is facing a contraction in its economy of up to 1.5% this year, according to the central bank.
"These risks are exacerbated by investor concerns over the sustainability of the Italian government's debt burden, which has contributed to the difficult wholesale funding conditions faced by Italian banks," Moody's added.
Originally posted by marg6043
Will the printing presses will start humming again to save whatever big criminal scandal is going on with JP Morgan?
Be the judge because the money protection team will be making sure we the populace do not learn how bad is going to be.
Overall derivatives, especially interest-rate-linked derivatives, have increased by over $100 trillion since the crisis began. As JPM just evidenced, and as hinted at by the interminable hand-wringing over allowing Greece’s paltry $78 billion in credit-default swaps to be triggered, real dangers lurk here.
I wish I could analyze the situation better than the rest of the crowd that either screams catastrophe looms or coos that everything is safe, but I cannot. The situation is too opaque, too convoluted, and too complex to tease apart. I simply don’t know what the true nature of the risk really is -- and the truth is, nobody really does. You might as well ask these analysts to tell you the exact size and shape of the first ten waves that will hit Laguna Beach exactly one year from now ...
J.P. Morgan Chase & Co., for more than 200 years, has made most of its money by arranging loans to governments, companies and individuals. So far in the 21st century, the bank is getting more revenue by rearranging borrowers' debt payments in the so-called swap market.
The second-biggest U.S. bank gets as much as $10 billion a year helping customers from Fannie Mae, with the highest credit rating, to Humana Inc., whose debt is at the lowest investment grade, get cheaper financing by exchanging one borrower's fixed debt payments for another's floating rate obligation. These interest-rate and currency swaps are now New York-based J.P. Morgan's biggest money-maker.
JPMorgan Chase & Co. (JPM) and Goldman Sachs Group Inc. (GS), among the world’s biggest traders of credit derivatives, disclosed to shareholders that they have sold protection on more than $5 trillion of debt globally.
Just don’t ask them how much of that was issued by Greece, Italy, Ireland, Portugal and Spain, known as the GIIPS.
As concerns mount that those countries may not be creditworthy, investors are being kept in the dark about how much risk U.S. banks face from a default. Firms including Goldman Sachs and JPMorgan don’t provide a full picture of potential losses and gains in such a scenario, giving only net numbers or excluding some derivatives altogether.
European Union trade commissioner Karel De Gucht said that both the European Commission and the European Central Bank (ECB) were working behind the scenes on contingency plans for a break-up...
...The first public declaration that preparations are in place came as economists at UBS said European taxpayers would have to swallow losses on Greece, whether or not it remains a member of the currency union.
Under a best case scenario, which would see Greece remain inside the euro but its colossal €274bn of outstanding debt put on a more sustainable path, UBS said European taxpayers would have to write-off €60bn of the €182bn of rescue loans they have provided.
If Greece was to leave the euro, however, the bill would jump to at least €225bn as the new currency would halve in value and €104bn of additional emergency funding by the ECB would be wiped out.
Contagion to the banking sector and across the eurozone, coupled with the economic damage that would cause, would lead to further unquantifiable costs. Other economists have estimated the final bill at nearly €800bn. UBS said the losses would cripple the ECB, which would need to be recapitalised...