The day of the final payment came for ten American banks: paying 68 billion U.S. dollars, they gained freedom. Thus, returning the dept of the government financial help within the program of TARP (Troubled Asset Relief Program), these banks are again out of the United States Government control. However, there is much less pleasant news for the financial industry: the ratings of 18 U.S. banks have dropped. Experts predict tough times also for the European banks.
The U.S. government implemented payments through TARP program after the bankrupt of Lehman Brothers shocked the financial markets last fall. 125 billion U.S. dollars were allocated in order to help major banks, which had to be sufficient during the current economic crisis.
Despite the fact that the banks’ return of their previous emergency government financial help demonstrates their strength, it is too early to talk about full recovery of American, as well as European banks: stock rating agency Standard & Poor’s (S & P) downgraded the rating of 18 U.S. banks.
«Prospects for the industry are very dark», – commented S & P analyst Rodrigo Kvintanilla on the event. This action affected, in particular, the fourth-largest U.S. bank Wells Fargo, which credit ability was evaluated to level AA- by S & P.
S & P is painting a gray picture also for the banks in Europe. «We expect the volume of reserves to grow significantly in order to cover potential risks in the loan business», – said analyst Scott Boogie,” which predicts that the delays in repayments in many European countries will double this year compared with the ones of the last year. According to the calculations of S & P, the 50 largest banks in Europe consolidated 128 billion euro as a reserve to cover potential risks in the loan business last year.
Experts of S & P believe that the banking sector in Europe and the U.S. will face some serious changes. «Industry is on the verge of aggressive changes, and in all likelihood, we will witness some dramatic shifts», – emphasized Mr. Kvintanilla.