European lawmakers have made financial rescue packages available, but having few takers could leave exchange traded funds (ETFs) in a holding pattern.
The primary reason so few banks have accepted government funds is that they’re wary of the signal it could send to financial markets. Other banks believe that they have sufficient capital or can meet the capital ratio requirements needed to weather the storm, reports Carter Dougherty for The New York Times.
Investors think that the financial stocks, especially ING, will end up with more government stakes in them before the financial crisis is over. There was no rush for Europe to nationalize this week, either.
The iShares MSCI EMU Index (EZU) is down 46.9% year-to-date.
The French bank, Groupe Caisse d’Épargne, reported that they lost $807 million as of Friday, by unauthorized trading of derivatives by a team on the bank’s own responsibility. Matthew Saltmarsh for The New York Times says the lender reported the loss a result of crazy market volatility last week and the position is closed.
The speculation of the losses due to big derivatives losses at such as large bank echoed through the Paris exchanges and put downward pressure on the banks’ shares.
One thing that could aid France in this downturn is the fact that there, it’s much harder to spend what you don’t have, reports John Laurenson for Marketplace. Qualifying for a mortgage there can involve proving you’re healthy and getting a life insurance policy.
That doesn’t mean all is well there – the housing market is bearish and thousands of restaurants and cafes have gone out of business – but France’s banking system is a little more trustworthy than most.
iShares MSCI France (EWQ) is down 43.5% year-to-date.