Daily Market Commentary for June 16, 2011
U.S. bank regulators criticized foreign regulators on how European financial institutions continue to set their own capital requirements which leave prospects for future bank problems "unsettlingly" high. (read more at Millennium-Traders.Com)
Federal Reserve Governor Daniel Tarullo raised concerns that U.S. banks have higher risk-based capital than their foreign competitors. The Fed Governor added that global regulators need to work on breaching those differences and aligning capital requirements. “Analysts have pointed out that large U.S. banks generally have markedly higher average risk weights, ratios of risk-weighted assets to total assets, and ratios of common equity to total assets, adjusted for differences in accounting, than some of their foreign competitors,” Tarullo said. “These large disparities cannot be easily explained away through differences in risk profiles, which are largely similar within the business lines of competing banks.” Tarullo went on to say, “Full international convergence will be achieved only if supervisors in all major financial jurisdictions ensure that banks across the world measure risk-weighted assets similarly.”
The deepening debt crisis with Greece raced through global financial markets on Wednesday which poses a quick check of U.S. banks which showed they risk losses of tens of billions of dollars should the Mediterranean nation default on its payments.
According to the Bank for International Settlements, U.S. banks had total exposure of $41 billion to Greece by the end of 2010. Nearly 83% is tied to “guarantees” that range from protection for sellers of credit-derivative contracts to other obligations owed to third parties.
In the form of debt issued by the Greek government, Greek banks and corporations, French banks had the most exposure, at $65 billion. Bank of America (NYSE: BAC), as of December 2010 had direct financial exposure to Greece in the amount of $477 million.
Economic data released today:
Initial Jobless Claims: U.S. Jobless Claims -16K to 414K in Jun 11 week vs. Survey -7K; U.S. June 4 Week Jobless Claims Revised to 430K from 427K.
Continuing Jobless Claims: U.S. June 4 Week Continuing Claims -21K to 3,675,000.
Housing Starts: April Housing Starts Revised to -8.8% from -10.6%.
Building Permits: Building Permits: +8.7% to 612K Rate in May.
Current Account: U.S. 1Q Current Account Deficit $119.3B vs. seen Deficit $126.0B; U.S. 4Q Current Account Revised to Deficit $112.2B vs. Deficit $113.3B.
Bloomberg Consumer Confidence: U.S. Bloomberg Consumer Comfort Index -44.0 last week.
Philadelphia Fed Manufacturing Index: Philadelphia Fed June Inventories -8.5 vs. May -5.4; Philadelphia Fed June Delivery Times -20.5 vs. May -2.3; Philadelphia Fed June Shipments 4.0 vs. May 6.5; Philadelphia Fed June New Orders -7.6 vs. May 5.4; Philadelphia Fed June Employment 4.1 vs. May 22.1; Philadelphia Fed June Price Paid 26.8 vs. May 48.3; Philadelphia Fed June Business Index Expected 8.0; Philadelphia Fed June Price Received 4.4 vs. May 16.8;Philadelphia Fed June Business Index -7.7 vs. May 3.9.
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