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Soc Gen and Credit Agricole are the lead losers in a big sell off in Eurozone banks this morning.French banks are getting hit worst for 2 reasons.
1. There are reports about French banks going cap in hand to the Middle East looking for fresh cash. (BNP’s CEO has denied that he’s on a cash hunt in the Mideast, and he says his bank is fully capitalised.)
2. El-Erian said this morning that “These are all signs of an institutional run on French banks.”
As a result –
SocGen was down nearly 7% this morning as people grow concerned about the IMF’s desperate call for banks to be recapitalized. Now it’s down about 6.5%. Credit Agricole is down over 7%.
Other Euro banks are down too, for obvious reasons.
One new one: IMF issued a statement yesterday that said that Euro banks have $410 billion in exposure to the crisis in the Eurozone. The IMF also said that banks need to recapitalize to ensure that they can weather potential losses.
In case you missed it, last month the IMF had identified a 200 billion euro shortfall in European bank capital. That number was criticised, and the IMF’s latest report said the 200 billion figure was not a hard measure of a capital shortfall. Instead, it measured how risk exposure had increased as sovereign debt prices had fallen.
The IMF added that a further 100 billion euro increase in exposure was related to a recent decline in bank asset prices and rise in bank funding costs.
This isn’t really new news, just confirmation of what Christine Lagarde and Deutsche Bank chief Josef Ackermann, among many others, have been saying for a while.
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