[Debate] Australian Banks Given One Week To Prepare For European "Meltdown"

[Riaz K Tayob]

  Australian Banks Given One Week To Prepare For European "Meltdown"

Tyler Durden's picture <http://www.zerohedge.com/users/tyler-durden>
Submitted by Tyler Durden <http://www.zerohedge.com/users/tyler-durden> 
on 12/15/2011 15:19 -0500


Whereas previously we had heard extensive horror stories about banks 
being told to prepare for the end of the world in case the European 
summit (the latest and greatest one from last Friday which was supposed 
to find a cure for cancer among other things) failed, and even went so 
far as to read about preparations for trading in the drachma on a when 
issued basis, once the summit passed (and it was clear that media 
posturing would do nothing to fix what has already been a failure and it 
would be best to remove the threats of "reality" from the public's 
attention) all such "end of the world" speculation promptly disappeared 
- after all why remind people that things are now worse than ever.  
Until today. According to the Australian Finance Review (link 
<http://bit.ly/vjlcvA> - subscription required), banks down under "*have 
been given 1 week by regulators to stress test how they would handle a 
spike in joblessness, plunge in home prices spurred by EU debt crisis*." 
Aka a European "Meltdown." And since we don't have immediate access to 
the article, we leave it to Bloomberg First Word to describe for us what 
the article says:

  * Australian Prudential Regulation Authority envision worst-case
    scenario of 12% unemployment, 30% drop in house prices, 40% fall in
    commercial property values, AFR says
  * *Banks will assume that write-offs, other mitigation measures are
    unavailable; later stress tests might allow for such steps, AFR says *
  * Australia's banks have A$87.2b of exposure to Europe, or 2.7% of
    assets, with A$74.6b of it mostly tied to bank borrowers in France,
    Germany, Netherlands, AFR says, citing RBA statistics

Why is this notable? Because unlike before, when media reports were 
really a propaganda ploy to get European politicians to collaborate 
(what has now proven to be an impossible task), and nothing but a 
rhetorical device, this time around, the warning is for real. And, more 
importantly, we have a sense of urgency, courtesy of the 1 week 
deadline: the question then is is it really that bad, and does Europe 
truly have a little over a week for global banks to prepare for the 
inevitable fall out?

Lastly, how long until our own prudent leaders decide it may be time to 
push the Stress Test scheduled for next year forward, just in case the 
"unthinkable" does happen, and US banks end up getting stampeded even as 
the rest of the world is already prepared for a worst case scenario?

We are confident Tim Geithner will get right back to us asap on all of 
these open items.

Average:
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