Further on yesterday's blog, and again via zerohedge, comes this chart by Capital Context.
Zerohedge reports "At 235bps, the FSB30 stands just shy of the peak levels that were seen in the initial March 2009 crisis moment - though remains below Q4 2011 peak crisis levels. "
And this goes to the argument of yesterday.
But first up this is the 30 most systemically important global banks. That is, they are large and therefore 'safe'. They are also Too Big to Fail - or - will be bailed out should they make a colossal loss, because to allow them to fail would cause a systemic shock to the global financial system. So 'safe', right.
Essentially by creating this list of TBTF banks, the regulators have created a run on any other bank in the world, but that is another issue.
But it begs the question of the Fed research in yesterdays blog - when it said that when interest rates are zero US (and global) banks have no financial incentive to put their money anywhere else other than park it with the Fed. That research piece is a piece of shite.
This graph shows that a bank who wanted to park its money in (okay this graph is in aggregate, but the point is made) a TBTF bank, it could be earning 25 basis points plus 235 basis points. Or 2.6% rather than the 0.25% it earns at the Fed.
So there is an opportunity cost, and in todays world, quite a large one. Using yesterdays data of funds parked with the Fed of US$1.5 trillion, the oppotunity cost to the banking sector (and shareholders) is US$32.25 billion.
They are prepared to forfeit that revenue for the sake of capital security. They simply do not trust the counter parties. They are the ones with the insider knowledge. And if they don't why would we?
Zerohedge reports "At 235bps, the FSB30 stands just shy of the peak levels that were seen in the initial March 2009 crisis moment - though remains below Q4 2011 peak crisis levels. "
And this goes to the argument of yesterday.
But first up this is the 30 most systemically important global banks. That is, they are large and therefore 'safe'. They are also Too Big to Fail - or - will be bailed out should they make a colossal loss, because to allow them to fail would cause a systemic shock to the global financial system. So 'safe', right.
Essentially by creating this list of TBTF banks, the regulators have created a run on any other bank in the world, but that is another issue.
But it begs the question of the Fed research in yesterdays blog - when it said that when interest rates are zero US (and global) banks have no financial incentive to put their money anywhere else other than park it with the Fed. That research piece is a piece of shite.
This graph shows that a bank who wanted to park its money in (okay this graph is in aggregate, but the point is made) a TBTF bank, it could be earning 25 basis points plus 235 basis points. Or 2.6% rather than the 0.25% it earns at the Fed.
So there is an opportunity cost, and in todays world, quite a large one. Using yesterdays data of funds parked with the Fed of US$1.5 trillion, the oppotunity cost to the banking sector (and shareholders) is US$32.25 billion.
They are prepared to forfeit that revenue for the sake of capital security. They simply do not trust the counter parties. They are the ones with the insider knowledge. And if they don't why would we?
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