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Update: World Financial Crisis and GDP projection 2009 Drs. A.G. Romero Presentation CBS, KvK, and BNA June 9, 2009.

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Presentation on theme: "Update: World Financial Crisis and GDP projection 2009 Drs. A.G. Romero Presentation CBS, KvK, and BNA June 9, 2009."— Presentation transcript:

1 Update: World Financial Crisis and GDP projection 2009 Drs. A.G. Romero Presentation CBS, KvK, and BNA June 9, 2009

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5 Returns, volatility, and length of crises in months Length of crisis (Months) Returns (%) U.S. Volatility (%) U.S. Returns (%) U.K. Volatility (%) U.K. Returns (%) The Neth. Volatility (%) The Neth. Credit crisis (2008) Dot.com (2000) Black Monday (1987) Oil crisis (1973) Second WW (1939) Great Depression (1929) First WW (1914) Crisis (1873) American Civil War (1862)

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7 Interagency Supervisory Capital Assessment Program “Stress testing” coordinated by the IMF for the 19 largest banks in the U.S. (May 2009) “Stress testing” coordinated by the IMF for the 19 largest banks in the U.S. (May 2009) These 19 banks hold two third (2/3) of all assets of the US banking system These 19 banks hold two third (2/3) of all assets of the US banking system Stress test focused on 3 major areas: Stress test focused on 3 major areas: A. Capital adequacy B. Effective liquidity management C. Effective risk management

8 A. Capital Adequacy Results stress tests IMF (May 2009) All US banks need $75 billion 1. Bank of America: 33.9 billion 2. Wells Fargo:13.7 billion 3. GMAC:11.5 billion 4. Citigroup: 5.5 billion 5. Regional Financial: 2.5 billion 6. Sun Trust: 2.2 billion 7. Key Corp: 1.8 billion

9 A. Capital Adequacy (cont’d) Results stress tests IMF (May 2009) Results stress tests IMF (May 2009) 8. Morgan Stanley: 1.8 billion 9. Fifth Third: 1.1 billion 10. PNC: 0.6 billion 11. American Express, 12. BB&T, 13. Bank of 11. American Express, 12. BB&T, 13. Bank of New York Mellon, 14. Capital One, 15. Goldman New York Mellon, 14. Capital One, 15. Goldman Sachs, 16. JP Morgan Chase, 17. Metlife, 18. State Sachs, 16. JP Morgan Chase, 17. Metlife, 18. State Street, and 19. US Bancorp are sufficiently Street, and 19. US Bancorp are sufficiently capitalized. capitalized.

10 B. Effective liquidity management Key question: Can the liquidity of the banking sector fare under the stressed market conditions? Key question: Can the liquidity of the banking sector fare under the stressed market conditions? Result: Daily monitoring of the liquidity management of U.S. banks Result: Daily monitoring of the liquidity management of U.S. banks

11 C. Effective risk management Adequacy of risk management system; Adequacy of risk management system; Counterparty risk; Counterparty risk; Credit risk (structured credit products and mortgage lending on HIGH alert); Credit risk (structured credit products and mortgage lending on HIGH alert); Monitor the link between risk-taking and compensation; (bonus of top managers); and Monitor the link between risk-taking and compensation; (bonus of top managers); and Effective internal communication of risks. Effective internal communication of risks.

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13 Lessons from George Soros Loan To Value ratio (LTV) is important; Loan To Value ratio (LTV) is important; Past experience: Outstanding loans as % GDP was lower than today e.g., 150% in 1955, as opposed to 300% + today (HIGHLY LEVERAGED market); Past experience: Outstanding loans as % GDP was lower than today e.g., 150% in 1955, as opposed to 300% + today (HIGHLY LEVERAGED market); Mortgage loans was limited to 80% of the value of the properties (in 1950’s); Mortgage loans was limited to 80% of the value of the properties (in 1950’s); Loans linked to an investment portfolio was limited to 50% (legal margin) of the value of the portfolio (in 1950’s); and Loans linked to an investment portfolio was limited to 50% (legal margin) of the value of the portfolio (in 1950’s); and Concentration risk: Government loans in many countries is the multiplication factor of GDP (Latin- American banking crisis of the 1980’s) Concentration risk: Government loans in many countries is the multiplication factor of GDP (Latin- American banking crisis of the 1980’s)

14 Developments housing prices in the Netherlands

15 Bankruptcies in the Netherlands

16 Unemployed persons in the Netherlands (3 months average: )

17 Dutch security exchange market (AEX-index)

18 Main developments Netherlands Antilles (real % changes) Domestic expenditure Private sector Private sector Investment - Investment Consumption - Consumption Public sector Public sector Investment - Investment Consumption - Consumption Foreign net expenditure Export of goods & services Import of goods & services GDP3.82.0

19 Expected developments in 2009 Slower economic growth of 1.0% due to fewer domestic activities caused by a further slowdown of the world economy. Slower economic growth of 1.0% due to fewer domestic activities caused by a further slowdown of the world economy. Lower inflation of 2.1% stemming from decelerating global commodity prices. Lower inflation of 2.1% stemming from decelerating global commodity prices. Debt relief started in February 2009 (For Curaçao: May 2009). Debt relief started in February 2009 (For Curaçao: May 2009). Lower surplus on the balance of payments due to higher current account deficit combined with lower external financing. Lower surplus on the balance of payments due to higher current account deficit combined with lower external financing.

20 THANK YOU!


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