European banks prepare for worst, hoard cash

[dipsydoodle]

Jan 20 (IFR) - European banks are preparing for a potential worsening of the region's sovereign and banking crisis, with many firms stockpiling cash and cutting back on loans to new clients as they seek to protect themselves against a possible seizing-up of financial markets.

Faced with 650 billion euros of debt coming due this year - almost 40 percent of which matures before the end of March - lenders are choosing to build up a cash cushion to ensure they can cover redemptions, creating a squeeze on the wider economy in the process.

Such hoarding illustrates the nervousness of lenders even after the European Central Bank injected 489 billion euros of cash into the banking system in December. Cash deposits at the ECB have ballooned since then, reaching a record 528 billion euros this week - higher than after the Lehman Brothers collapse.

"The big concern is that things might get worse," said Bernd Hartwig, treasury manager at Nord/LB. "Political decisions are taking too long and most banks are building up liquidity just in case something happens. They are very worried that a new crisis could be a bigger than 2008."

http://www.reuters.com/article/2012/01/20/us-europe-banks-cash-ifr-idUSTRE80J0U320120120

[sarcasmo]

1. Get ready for a war distraction.

[got root]

4. Not just to distract, but to generate new revenue, and debts... gotta keep the world goin roundq

I am just wondering which 'Arch Duke' will take us there?

[sakabatou]

2. Haven't banks done the same here when the economy went sour?

[cstanleytech]

3. Banks and corporations both have been sitting on their hands.

The banks because they are scared to invest and the corporations I suspect because their probably hoping to be able to buy the assets of any businesses that dont have the cash to survive down the road at a cheap price.

[EFerrari]

6. Am I misremembering or did the drug cartels bail out Wall Street

the last time there was a cash flow problem? In 2007 or so?

[BeHereNow]

5. Canary in the coal mine...

Meanwhile, other banking institutions, like say, in China
have been hoarding gold.

The world is getting curiouser and curiouser.

BHN