Busted: Bankers and The Global Economy

July 13, 2008

EU: Investment Banking Exposed

The European Union is working on what banks fear the most: transparency to investors. Investors will soon find life easier by having the ability to compare financial statements from banks in the European Union, thus helping to avoid more surprise writedowns and installing confidence.

Governments want to improve transparency in the global financial market that is gripped by the credit crisis. About a year has passed as banks continue write-off huge sums invested in securitized products hit by defaulting U.S. home loans. The European Union sees this as a winning idea that protects investors and the government. Apparently, bankers in trouble will be sacrificed on the altar of “bad luck”.

Beginning in August, EU banks “will be able” to publish their accounts, government sources eagerly announced. Ministers said full disclosure by banks and other financial institutions of their exposures to such distressed assets and off balance-sheet vehicles was essential to bring back confidence in the market. Has the EU considered the possibility of economic backlash? Perhaps, this move is an indicator of the health of EU banks in general. Clearly, government officials in the EU are thinking very differently from the hush-hush economic atmosphere in the United States.

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