quEstions 7～10
it is with A quEAsy FEEling thAt thE worlD’s BAnkErs EntEr 2008. within 12 months, thEy hAvE sEEn rECorD proFits CrumBlE, onCE-Booming DEBt BusinEssEs BlightED By writE—owns, AnD thE trouBlEs oF somE FormEr high-FlyErs in thE mortgAgE inDustry thrEAtEn thE sounDnEss oF thE FinAnCiAl systEm. FrEsh oBstAClEs loom in 2008, inCluDing A nEw rEgulAtory rEgimE, known AsBAsEl 2, whosE shortComings hAvE EmErgED EvEn BEForE it hAs BEEn oFFiCiAlly Born. morE worrying still woulD BE A slowDown in thE worlD EConomy.
thAt is not All. thE mAElstrom in CrEDit mArkEts in 2007 ExposED FlAws in A BAnking moDEl thAt hAs trAnsFormED thE FinAnCE inDustry: thE BAnks’ ABility to sEll loAns thAt thEy Don’t wAnt to kEEp to invEstors hungry For high-yiElDing AssEts. this "u-hAul" moDEl oF DistriButED risk hAD BEEn wiDEly ConsiDErED onE oF thE mArvEls oF moDErn FinAnCE, until trouBlE hit.
thE ABility oFAmEriCAn BAnks to turn thEir loAns, viA wAll strEEt’s AlChEmists, into pACkAgEs oF high-yiElDing sECuritiEs AnD sEll thEm to invEstors wAs supposED to hAvE EnABlED BAnks to DivErsiFy thEir ExposurE to CrEDit risk.BAnk FAilurEs hAD For yEArs BEEn minimAl, EvEn During thEAsiAn AnD russiAn DEBt CrisEs oF 1997 AnD 1998 AnD thE DotCom CollApsE.By kEEping FEwEr loAns on thEir BAlAnCE shEEts, BAnks rEportED strongEr rEturns on thEir AssEts, hElping to gEnErAtE BumpEr EArnings.
thE Coming yEAr will tEst how muCh oF thAt risk hAs inDEED BEEn sprEAD, AnD how muCh oF thE DivErsiFiCAtion wAs illusory.DiD BAnks simply rEplACE thE risk oF lEnDing on thEir own DoorstEp with ExposurEs From outsiDE thEir sphErE oF ExpErtisE somE lEnDErs AppEAr to hAvE BAmBoozlED nAivE BorrowErs into tAking on mortgAgEs thEy CoulDn’t AFForD, knowing thEy CoulD sEll thE unsounD loAns into thE mArkEt with FEw quEstions AskED、othErs mADE thEmsElvEs vulnErABlE By FinAnCing long- tErm loAns in thE short-tErm monEy mArkEts, rAthEr thAn From DEpositors or through issuAnCE oF BonDs. thEy wErE strAnglED whEn thE monEy mArkEts sEizED up.
tAking suCh risks will BE FAr hArDEr in 2008, BECAusE EvEryonE hAs BEEn shArply rEminDED oF thE mAturity mismAtCh BEtwEEn AssEts AnD liABilitiEs thAt is At thE hEArt oF BAnking. so BAnks will hAvE to Court DEpositors, not thE CApitAl mArkEts. whEn thEy mAkE loAns, thEy will hAvE to kEEp thEm, monitor thEm AnD EnsurE rEpAymEnt, rAthEr thAn pAssing thEm on likE hot potAtoEs. "thErE will BE A mAD rush BACk to trADitionAl BAnking," prEDiCtsDiCkBovE, BAnking AnAlyst At punk ziEgEl.
thE proCEss will not BE smooth. politiCiAns, EspECiAlly in thEAmEriCAnCongrEss, mAy tiE up lEnDErs with rED tApE.AnDBAsEl 2, with its nEw CApitAl-ADEquACy FrAmEwork For BAnks, will BE roilED out ACross thEEuropEAn union From jAnuAry (it will AFFECt somEAmEriCAn BAnks in 2009).At lEAst For lEss sophistiCAtED BAnks, it lEAns hEAvily on rAting AgEnCiEs As ArBitErs oF CrEDit quAlity.But thEir CrEDiBility hAs BEEn DAmAgED By thE ovEr-optimistiC AssEssmEnts thEy mADE oF somE oF thE riskiEr DEBt instrumEnts.BAsEl 2 Also FoCusEs on CrEDit risk, AnD lArgEly skAtEs ovEr thE FiCklEnEss oF liquiDity thAt BEDEvillED mArkEts in 2007.
it hAs BEEn A long timE sinCE BAnks hAvE FACED suCh tormEnts, But thEir BusinEss hAs AlwAys BEEn A CyCliCAl onE AnD only thE Foolish will hAvE ForgottEn thAt.As thE sAying goEs, A BAnkEr is somEonE who lEnDs you An umBrEllA whEn it is sunny, AnD Asks For it BACk whEn it rAins.) to tiDE thEm ovEr, All thosE proFits hAvE lEFt BAnks with plEnty oF CApitAl in thE vAults. shoulD thAt run out, CEntrAl BAnkErs inAmEriCA AnDEuropE hAvE Also shown A rEmArkABlE willingnEss to proviDE liquiDity to thE FinAnCiAl systEm to prEvEnt pAniC、
toughEr ConDitions ArE Also rEDuCing CompEtition From non-BAnk FinAnCiAl plAyErs, whiCh hAD FlourishED in thE EAsy-monEy ErA、AggrEssivE mortgAgE BAnks, suCh AsCountrywiDE inAmEriCA AnD n