Financial Crises And Public Finances: Where Is The Greatest Risk?
February 22nd, 2009Does the band play on for U.S. Treasuries?
This looks like a beauty pageant in a leper colony.
Via: BCA Research:
Our fixed income team has just published a Special Report comparing 22 developed government debt in the face of the current financial crisis.
The Special Report reviewed the vulnerability of these markets to rating downgrades as well as focused on the risks and potential costs associated with stabilizing their banking systems (after analyzing 150 banks around the world). A further loss of as little as 3% on total bank assets would wipe out most, if not all, of the remaining tangible bank capital in the countries we analyzed. U.K., Ireland, Denmark and Switzerland have the greatest risk of widespread nationalization (outside of Iceland). When the other main factors that determine overall sovereign credit risk are included (e.g. economic structure and prospects, monetary flexibility, fiscal flexibility, and external liquidity dependence) Iceland, Portugal, Ireland, Spain, Italy and the U.K. are at the top in terms of the risk of downgrades. The cost of cleaning up the U.S. banking system will also be painful, although the risk of a sovereign downgrade is less than in most of the other developed countries.
Research Credit: pookie
