european banking system...


***
Europe's banking system is in far worse shape than the US system. The losses may be bigger, and their capital to meet those losses is certainly less

In the first few years of the G.W. Bush administration, the banking authorities decided it would be OK to allow five banks to increase their leverage from 12:1 up to 30:1. Which five banks, you ask? Bear Stearns, Lehman, Merrill Lynch, JPMorgan, and Goldman Sachs. How did that work out, just five years later?

Regulators in the UK allowed 20:1 leverage on a regular basis. It is now almost 40:1 and with TCE is around 55:1. The assets of UK banks are about five times as large as UK GDP. By comparison, for the US the ratio is barely 2:1.

UK also had a housing bubble. They have their own bailouts to deal with, which are massive and will potentially get much larger.

somehow, UBS and Credit Suisse ran up a little leverage. Before the crisis, they were over 40:1. And now they're nearly at a nosebleed-high 70!

In Eurozone, things even get far worse. And here's the real issue. They have no Paulson and Bernanke. The European Central Bank, at least as of now, cannot step in and start saving individual banks. How do you save a Spanish bank and not an Austrian bank? Austria's banks have made large loans to Eastern Europe, in euros and Swiss francs, and are going to have large losses, far more than 3%, which would wipe out their capital. But bank assets in Austria are 4 times GDP. What we have are banks that are too big to save for relatively small Austria.
***