#2-18 Africa rising

ESG Review18 Africa Rising

11th Dec, 2011 10:00-12:00 Saint-Marc Café in Kanda

Ogawa, Iino, Ido, Sugahara, Kurasawa and Mizutani

[Leaders] Africa Rising

[Business][Business education] Field of dreams

[Finance & Economics][Bank funding] The dash for cash

Afghanistan and the West

We gathered at Kanda for the first time. Kanda is for me very convenient location because it’s near from my room. And it is also good for us that Kanda on Sunday is quiet because few people come to this place on weekend so we can use enough space in the café. We continued to speak all in English this week. At first we worried that we couldn’t discuss substantial contents in case we don’t use mother tongue but we came to think that we couldn’t tell anything to the people outside Japan if we don’t use English. This is a practice to tell someone what we are thinking now.   

I picked up "The dash for cash". 

Bank funding

The dash for cash

Europe’s troubled banks are running out of money

Why I picked up the article:

Banking system is linked between countries and regions. I’d like to know their current situation to prepare for the worst possible case.

Summary:

European banks are facing with an investor strike so they are putting a halt to new loans and selling and pawning all they can. Unless the investor strike lifts soon, Europe risks a credit crunch. At worst, there may even be bank runs and failures (so we need a more action).

(1) Bank bond markets that provide the longer term and stable funding have frozen up almost completely for European banks.

・ Shifts from unsecured to secured bonds (which are backed by assets)

・ Bond sales €17 billion (2011) ⇔　€120 billion(2010)

Links between banks and governments

・ Now governments are leaning on banks to keep buying their bonds (which is different from 2008)

(2) Short term interbank markets or money markets are also drying up.

・ American money-market funds, which were a bog source of dollars in European banking system reduced loans 40% over the past six months.

・ Banks are reluctant to lend to one another except for the shortest possible time, usually overnight.

A ”nightmare scenario”

・ the trickle of deposit leaking from banks in peripheral countries turns into a full-flood bank run.

(3) A need for more action by central banks

・ New measures to ease a shortage of dollars in banking system.

・ Longer term loans by ECB (over one year)

・ Government guarantee for bank debt