The four French Gosbanks have €5.645 trillion of liabilities. That is 2.8 times French GDP (€1.986 trillion).
|2011 Q2||BNP||Cdt Ag Grp||Soc Gen||BPCE||Total|
Amounts in billion of euros.
Their shareholder’s equity is only €210 billion.
Their leverage average is at 26.8 (i.e. a Tier 1 ratio at 3.7%), worse than Lehman Brothers before its bankruptcy (25).
To have leverage at 10, equity should increase until €360 billion. Only the state could do that, which would cost €5.600 per inhabitant (64 million)!
This solution, inevitably, was raised by the former director of the IMF when he would be (socialist) candidate in the French presidential election (before his arrest in New York).
By comparison, the big three US banks have a total of $5.962 trillion in liabilities (a third of GDP, unless the four French Gosbanks in view of exchange rates) but they have $570 billion of equity and through leverage average at 10.5.
|2011 Q2||Bank of America||JPMorgan||Citigroup||Total|
|Tier 1 (%)||10.3||8.5||9.9||9.5|
Amounts in billion of dollars.
The big three US banks have not Undated Super Subordinated Notes eligible as Tier 1 capital nether Equity instruments and associated reserves! Shareholders’ Equity is Common Equity.
The four French Gosbanks are engaged in the PIGS for several hundred billion of euros.
In the euro zone, the default of payment (in currency) of banks with systemic risk (as May 6, 2010 according to the bulletin of the ECB in June) will cause a catastrophic fall of dominoes and a credit tsunami.
The B-2 stealth bomber, Ben Bernanke said the Fed had considered the consequences of this European crisis on the U.S. economy that can withstand the shock.
The main problem in the euro zone is not the public debt, but the differences in earnings and productivity levels, hypertrophy of money supply and especially the under-funding of (over indebted) big banks too big to fail.
The spreads (in Treasuries bonds yields) give some indications of the tensions in the euro zone.
The AAA rating of France is not justified, nor the degradation of the United States by S & P.