Topic: Report: More Than 50% of the Worlds Banks May Be Too Weak To Survive A Recession (Read 427 times)

Bumping this.

As it could be relevent now.

That is why if you want to keep your money in banks, you need to choose from the list of the top 10 largest banks, or invest the amount that insurance agencies can return to you in case of bank bankruptcy. You can also distribute your funds to different banks and be sure that everything will be reimbursed to you also with interest.

Given the fact that large companies such as Apple, Amazon, Ping An have begun to provide financial services, and their credit cards are especially in demand, then in this case, bad times really come for banks. According to competent analysts, in order for the banking system to remain operational and many banks to survive after the next economic crisis, banks will have to introduce new technologies, as well as use outsourcing and large-scale mergers with other banks and structures.  Otherwise, such banks simply run the risk of disappearing.

Bumping this.

As it could be relevent now.

However, now we have the opportunity to observe for the first time how Bitcoin and other decentralized cryptocurrencies will behave when the global economic crisis sets in. It is assumed that Bitcoin appeared after the previous economic crisis of 2008 as an alternative to existing traditional payment systems, namely, as an inflation-free currency. It seems to me that we cannot avoid a very tough economic crisis, and therefore we will have such an opportunity.

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. 

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.

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

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?

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. 

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.

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.

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.

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

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.

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.

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.

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.

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 echo these thoughts. Even though bitcoin per se is considered as disruptive in today's standards, I still don't buy that bitcoin and other crypto are the reasons why there will be a recession. For the most part, banks and governments cause these recessions themselves until it creates a chain reaction on different parts of the industry because by then, everyone and their mothers would be in a hurry to get their assets out of a bank, causing it to implode from the inside and boom, money is gone.

A recession occurs because of mismanagement, boom and bust cycle, geopolitical instability, etc., not because of Bitcoin.

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.

Also, banks are near into experiencing recessions because of the enormous emergence of digital banks plus the growing adaptation of bitcoin which people is loving more because of its decentralization and the technology provided by blockchain which can hold theur assets without fees and threats unlike banks.

the number of active bitcoin users is only between 2.9 and 5.9 million

All banks are inherently weak during a recession

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.

It should be mentioned that even china's largest and most prosperous banks are facing great difficulties atm.

Some banks are already preparing for it. the De Nederlandsche Bank or Dutch Central bank has hoarded gold worth around €6 billion.

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 deterioration in banks' net liquidity position (as a percentage of total assets, on the Y-axis) shows a median survival period of 6 months (176 days) in the event of an adverse shock (orange curve) and 4 months (122 days) in the event of an extreme shock (red). In blue, the curve of the base scenario, without shock.

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.  

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.

“We believe we’re in the late economic cycle and banks need to make bold moves now because they are not in great shape,” Kausik Rajgopal, a senior partner at McKinsey, said in an interview. “In the late cycle, nobody can afford to rest on their laurels.”

The decade since the global financial crisis has seen a wave of innovation in financial services, bringing new competitors from fintech startups to giants like Apple Inc. and Alphabet Inc.’s Google. Banks have pondered whether to compete with, partner with or acquire some of these newcomers. Some established firms have sought to rebrand as technology companies, in part to attract hard-to-get talent.

McKinsey, whose clients are some of the biggest corporations in the world, consults on topics ranging from strategy and technology to mergers and acquisitions, outsourcing and stock offerings. In its report, the firm said banks risk “becoming footnotes to history” as new entrants change consumer behavior. Most recent attempts by banks to boost efficiency have been “business-as-usual,” it said.

Banks allocate just 35% of their information-technology budgets to innovation, while fintechs spend more than 70%, McKinsey said. Combined with regulatory factors lowering the barrier to entry -- like open banking and looser requirements for startups -- the environment is increasingly conducive for newer firms to take share from banks.

The report points to Amazon.com Inc. in the U.S. and Ping An in China as examples of technology firms that are capturing financial-services customers. To make matters worse for the old guard, the new players tend to go after the business areas that create the highest returns at banks -- credit cards, for example.

Investors have taken notice. Globally, banks’ valuations have fallen 15% to 20% since the start of last year, McKinsey said, adding that “the drop in valuation suggests that investors anticipate a sharp deceleration in earnings growth.”

Lenders can cut costs and find funds for technology by outsourcing what McKinsey calls “non-differentiating activities,” including some trading and compliance functions. Banks “need to get much more comfortable with external partnerships and being able to leverage talent externally,” Rajgopal said.

Read more: BofA’s cloud expansion could ‘save a ton of money’

Another way to free up money: get bigger. BB&T Corp. and SunTrust Banks Inc. said as much when they announced their decision to combine earlier this year -- the biggest U.S. bank merger since the financial crisis. Rajgopal said he expects M&A to continue in the late cycle.

“Going forward, scale will likely matter even more as banks head into an arms race on technology,” the report says.

https://www.bloomberg.com/news/articles/2019-10-21/banks-must-act-now-or-risk-becoming-a-footnote-mckinsey-says