Report: More Than 50% of the Worlds Banks May Be Too Weak To Survive A Recession

[Strongkored]

Hopefully we won't ever have another 2008 bank crisis.    Even though everyone seems to be shouting exactly such a thing will happen inevitably from the mountain tops.

I believe this is definitely happening, what I'm concerns is how my government to handles this case, because when the bank collapsed that must be responsible to resolve this is the government, if the government only does the same thing as in 2008, then the government only continues to protect the capitalist who take part in this repetition conditions.

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[SummerBliss]

If financial crisis rise once again like in 2008 then the market will collapse and poor people will suffer the most as banks and governments will protect the interest of elite businessmen to protect them.Most of the banks have policies to face such problems like they have started to make reserves in form of gold and fiat to solve this issue and these digital coins can be used by governments at that time to boost the economy.

[alyssa85]

More than half of the world’s banks are already in a weak position before any downturn that may be coming, according to a report from consultancy McKinsey & Co.

A majority of banks globally may not be economically viable because their returns on equity aren’t keeping pace with costs, McKinsey said in its annual review of the industry released Monday. It urged firms to take steps such as developing technology, farming out operations and bulking up through mergers ahead of a potential economic slowdown.

Most of these banks are in the eurozone. Germany for example has at least a dozen very weak banks. They can't make a profit thanks to the eurozone's negative interest rates.

Negative interest rates are at their lowest in the eurozone and in Denmark at -0.5% an. In Japan it's -0.1%.   

If your country has positive interest rates, the banks are likely safe and profitable. It's the negative interest rate zones that are a problem.

[V1saya]

In my country Philippines, bank interest rates on deposits are becoming lower and lower. But I don't think they are losing as they continue to reach their quarterly income targets. Our interest rates are dying most probably because there is too much liquidity. Or maybe my country is not in the same situation with American, European and Chinese banks. Some economists are saying our country is becoming one of the safe sanctuaries on the current trade war.    

[djsugar]

The segregation in banking system has become more pronounce now. There are many small banks which have bad debts too, for them surviving the incoming recession would be really hard. What I think is that countries should have a few big banks which can sustain during such times. In India, because of the increasing problems of bad debts, government is merging public sector banks. This I guess is a welcoming move but the effect is not always good because of the unmatched synergies. 

[Theb]

Banks are the real enemy of the people, I once worked in a commercial bank in Nigeria, I had to resign because of the volume of work they pile on me and pay peanut, I happen to be part of some cost management in my local branch, we spend money on many useless things and careless about staff warfare compare to what we spend huge money on. Banks are the real bad guys when they are distressed, they get a bailout.

I wouldn't say that they are the enemy here since they have also given you a job, banks are one of the biggest boosters of the economy in a country even though they are paying you "peanuts" they are still paying you and if you don't want it you have an option to do your best to get promoted or leave them for a better paying job. Banks are there to finance people who are in need may it be a loan for a business or anything you want to buy on credit. If this recession hits hard on banks then for sure that the economy will also be affected greatly.

[eaLiTy]

Most of the banks have policies to face such problems like they have started to make reserves in form of gold and fiat to solve this issue and these digital coins can be used by governments at that time to boost the economy.

There is a reason we call crises when the banks or the institutions or the government cannot handle the inflation and we have seen that in the past and every time the crisis happens in different forms and these things happen because of the miscalculation by the government, if there is any back up plan then the entire financial structure will crumble and that happened in Venezuela, Zimbabwe to name a few and even in the last crisis the governments were able to restore the issue by giving financial aides to banks but you cannot expect to do the same every time. 

[yoseph]

Most people have their monies in the banks because without it they are not going to get paid and that's the only reason. People's don't trust banks mostly because of the financial crisis in 2008 where they lost their savings but it seems those banks survived and they are making profits whilst no effort is being made to repay those who lost their monies.

[STT]

Hopefully we won't ever have another 2008 bank crisis.

We are certainly going to have a repeat, if thats the most useful thing I can do today on this forum then I got to make the super simple point: this failure event is forthcoming.   The fact is you are on the Bitcoin forum where Satoshi and others foresaw the need for an alternative to the traditional system, it was clear to them back in 2009 that this was required, QE cannot fix the failings of 2008 or what happened before and since then.   It will repeat until the mistake is stopped, nobody is forcing that true its just how economies have always worked.

[sikke]

Absolutely. Especially with low interest rates that encourage loose lending yet again, just like pre-GFC times.

If you look at some of the banks in India that are shutting down and becoming insolvent, the problem should already apparent. And it's hard to believe that India is the only nation that has these issues, they are just likely to be concealed right now in other countries.

People should realise this, and diversify into safe haven assets before it happens.

[Mometaskers]

More reasons to be wary of keeping all your wealth in banks. Now's probably a good time to have a vault installed. Maybe even jewelry might be worth keeping.

This may not be a good time to have money stored in banks, if indeed more than 50% of them are weakened and may not survive an economic downturn.

The real problem is where we go with our money, and no one seems to have a proper answer to that question. One could say that buying Bitcoin or Gold is a good option, or real estate, but even when doing that, there will always be a significant part of our worth stored in bank accounts because a bank is still the best place to actually store our money.

We do need cash, at least that's one thing that banks are still useful for. Hopefully it don't get so bad that banks restrict the amount of money that can be withdrawn like what happened when Greece went bankrupt. I'm just curious, do you stay within the government-insured limit of deposit?

[gantez]

I have experienced this situation where a lot of banks got liquidated in 1998 in Indonesia. Yeah, it was a mess, but from a business perspective, it's the way of removing unprofitable banks. The problem with this issue in the present day however, the Government of Indonesia now will "bailout" the users' saving account up to 2 billion IDR (about 142K USD) per person.

If that happens, guess how the government will pay? By printing more money from thin air, or in other words, debasing the currency.

Lately or like 7 years ago, some countries started the merger system. Here, the weak bank is joined with the bigger bank and operation continues. I think this is better than pushing money to banks inform of bailouts. If monies are pushed that way without proper monitoring and checkmating by regulating agencies, it will lead to too much money in circulation which can lead to inflation.

So, it is the responsibility of the government to monitor banks to see weaker ones to be merged or bought over. That should be the first step instead of printing more money into circulation.

[mu_enrico]

Recession is an integral part of the economic cycle. It is not there simply because a failure is done somewhere along the way. It is there because it is part and parcel of the economic cycle. The economic activities of a certain country or even region constantly expand and contract. That is the norm in the market. The spending rises and falls. And when the spending falls way below the normal level, it is when recession takes place. It is as old as humanity. It does not have anything to do with Bitcoin. 

That's correct. I was explaining the "economic cycle" and what could cause a recession in the "economic cycle."
So, what caused economic crisis 1998 in SEA and financial crisis 2008 in Europe & the US? It's not a mere "economic cycle" isn't it?

So, it is the responsibility of the government to monitor banks to see weaker ones to be merged or bought over. That should be the first step instead of printing more money into circulation.

Banks failure should not be the burden of government. Let the unprofitable die or naturally merged with a "hands-off" policy. If the government starts to take part in the market, the market becomes inefficient. Banks will be overly risk-taker because they know that in the face of bankruptcy, the government will save them.

[1Referee]

Most probably I won't be storing my money in the banks, not during this expected collapse.

The problem I see here is that while so many people expect a collapse/recession to happen very soon, it might not happen for at least another 5 or so years. Perhaps even longer.

I find the US stock market to be an exceptional collapse/recession indicator, because it shows what smart money thinks about the market and economy. Some of the biggest names in the tech industry such as Microsoft and Apple have reached new all time highs today, and some others are just a few percent away from doing so.

I will start to worry when we see the US stock market breaks below its bull trend that it has respected for so many years. Every dip is currently bought up because that's seen as a fantastic entry point, and thus far dip buyers did well.

We do need cash, at least that's one thing that banks are still useful for. Hopefully it don't get so bad that banks restrict the amount of money that can be withdrawn like what happened when Greece went bankrupt.

That's why people should hold some decent amount of cash at home hidden safely, enough to last them a couple of months at least.

I'm just curious, do you stay within the government-insured limit of deposit?

I do, but more so because I don't have enough in any of my bank accounts to exceed their threshold. I however wouldn't really pay too much attention to that because when you make the rules, you can break them too, which we have seen happen in various countries already.

[Mometaskers]

I'm just curious, do you stay within the government-insured limit of deposit?

I do, but more so because I don't have enough in any of my bank accounts to exceed their threshold. I however wouldn't really pay too much attention to that because when you make the rules, you can break them too, which we have seen happen in various countries already.

Never seen the government not pay the insurance in my country since there haven't really been a lot of bank to collapse but you do have the right approach. Have to be cautious with these. Especially if it's a large bank, the gov't can simply say they can't afford to pay all the depositors in one go.

[huu78]

I hope that the economic crisis is a fear for ourselves where the currency does not mean for us all.
But they are based on the country they do. If doing a good one then it will be able to survive the recession.
If the country's many problems could allow the currency to be impacted by it and it would be good before the save in the cryptocurrency would be better.

[Flor1982]

That is true and one way that some banks will survive is thru Bank company merging in which banks will just merged to one another. In merging they could minimize operation and labors cost while sharing their common depositors and investors in which this strategy works many times before that is why some of them did not bankrupt and keep on surviving.

[error08]

The recession might not happen, Joseph Stiglitz said; "the world economy began a severe slowdown, but there will be no crisis."
If the world economic crisis will occur, it will be a good chance to eliminate 50% of the world's bank, let the weak falls and the stronger remain in the game.
Furthermore, the global recession will be a good test for bitcoin, whether it will hold on, rise or fall.

[Kyraishi]

Yikes, that some scary stuff, I was always under the impression that banks were a lot more prepared and able to survive an attack like this, guess I am mistaken then.

I'm personally keeping a very minimal amount in the bank, most of the funds are either going into a cash spot I have, or paying off mortgages, or spent. Can't say I have more than 5,000 in my bank account at all times, the economy is really unstable so far and I like preparing for the worst.

[Vishnu.Reang]

It is not going to worry the bankers. The tax payers will bail them out, just like the case during 2008-09. The amount mentioned in the bank bailout bill (Emergency Economic Stabilization Act of 2008) was around $700 billion, but as per reliable sources the total cost for the treasury was much higher than that. And one year later, the bankers were going to Maldives and Seychelles for their holidays, as usual.