Basel is of course “not accountable” to anyone, as it deliberates in secret. But if you’re wondering where the rally came from in the Nikkei and Europe today, this is why….
The transition period for tighter capital requirements will probably start in 2012 or 2013, according to officials who declined to be identified because the Basel Committee on Banking Supervision’s deliberations are private. Bank stocks in Asia and Europe rallied.
By delaying the introduction of stricter standards, regulators give banks longer to repair balance sheets weakened by $1.71 trillion of losses and writedowns during the credit crisis. The Group of 20 Nations agreed in April that banks should hold more and better quality capital to reduce risks to the financial system.
Let me fix that second paragraph:
By delaying the introduction of stricter standards, regulators
give banks longer to repair balance sheetsallow banks to lie about their losses of weakened by$1.71 trillion of losses and writedownsduring the credit crisis. The Group of 20 Nations agreed in April that banks should hold more and better quality capital to reduce risks to the financial systemshould lie more frequently and flagrantly about their asset quality so as to bonus out money they don’t really have, even though doing so will virtually guarantee that cash flow will become insufficient in the coming years and lead to a global financial meltdown worse than the fall of 2008.
You heard it here first folks. $1 trillion in HELOCs on balance sheets here in the US, many of them worth exactly nothing, all carried at or near PAR (100 cents on the dollar), and all a “great game” until they either mature or the underlying first mortgage forecloses – at which point the detonation that has been hidden is uncovered, revealing only a smoking hole where an asset was claimed to be.