FT Europe's bank recapitalisation plan must change 2011.10.17 - 1 views
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sign off on a programme to give banks a deadline of six to nine months to boost capital ratios privately
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determined not to raise fresh money – either from shareholders, because equity prices are so disastrously low, or from the state, because of an understandable fear of being stigmatised as a bailed-out bank that is weaker than its rivals
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they would shrink their balance sheets, reducing the risk-weighted assets (or lending commitments) that form the denominator of their capital ratios, rather than boosting the capital that forms the numerator.
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often not insufficient capital that kills a bank (Dexia’s ratios were top-notch) but a lack of liquidity
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policymakers need to tackle the root cause of the problems in the periphery – namely, their budgetary mismanagement.
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normal rules of capitalism have already been suspended. We should stop pretending otherwise and make the necessary intervention quickly and decisively