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Updated 02:00 22/09/20

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Five potential blackswans circling the banking industry

Duncan Richardson, News Editor
10 Feb 2016, 3:29 p.m.

Banking shares have been decimated this week with Deutsche bank being hit hardest. Fears are growing the worlds too big to fail banks are being hit hard by the global slowdown. 2016 has been a turbulent year for financial markets and there are a number of potential flashpoints emerging.

China’s property bubble appears to be collapsing. Following the 2008 crash interest rates were slashed and credit soared as the Chinese built city after city. Private debt exploded and investors now fear China is facing their own subprime mortgage crisis.

China is desperate to rebalance their economy, but this transition will be painful. Analysts fear China is deliberately devaluing the yuan which could result in a wave of devaluations and usher in a full blown currency war.

Falling commodity prices is hurting the emerging markets. Brazil officially entered recession last year and Venezuela is on the brink of hyperinflation. The number of developing countries in trouble grows by the week. Russia, Nigeria and the whole of the Middle East are facing soaring budget deficits as the price of oil continues to plummet.

South Korea, Thailand and Malaysia are being dragged down by slow growth in China and countries and corporations which have borrowed in dollars are facing higher repayment costs and insolvencies no doubt will follow.

Central bankers are running out of options, they can either take rates into negative terrority or once again fire up the printing presses.

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