Libor is in coma

[Cees Binkhorst]

REPLY TO: D66 at nic.surfnet.nl

Zou dat iets te maken hebben met de aanwezigheid van grote hoeveelheden
slechte onderpanden (om maar niet te zeggen toxic waste).
Waarmee dan gelijk gezegd is dat de 'jaarrekeningen nog steeds geen
getrouw beeld' geven.

Groet / Cees

Interbank lending 'dies' after Lehman’s demise
Wednesday, June 2, 2010
LONDON - Bloomberg
A man leaves the Lehman Brothers headquarters building on Sept. 15,
2008, in New York. Lehman Brothers, a 158-year-old investment bank
choked by the credit crisis and falling real estate values, filed for
Chapter 11 bankruptcy protection from its creditors in 2008. AP photo

U.S. banks have all but stopped lending to each other, driving
transactions in the interbank market to the lowest level since August
1994 and undermining the validity of the suite of interest rates known
as Libor.

Loans between U.S. commercial banks have slumped to $153 billion from a
peak of $494 billion in September 2008, the month that Lehman Brothers
Holdings filed for bankruptcy protection. The London Interbank Offered
Rate, or Libor, is used to set interest charges on $360 trillion of
financial products worldwide, according to the Bank for International
Settlements.

“The interbank market died with Lehman Brothers,” said David Keeble,
head of fixed-income strategy at Credit Agricole Corporate and
Investment Bank in London. “Libor is a strange beast, because the market
that it’s based upon barely exists. It’s going to take a couple more
years to recover, and even then will never regain its former glory.”

Loans between banks have evaporated after central banks around the world
pumped cash into the banking system by lending money in exchange for
debt securities following at least $1.8 trillion of writedowns and
losses by financial institutions as of May 18. U.S. commercial banks
turned to the Federal Reserve for short-term borrowing after Lehman’s
bankruptcy led to a collapse in trust amongst financial institutions,
and the Fed opened its discount window to banks.

“There’s a lot more certificates of deposit that get issued instead of
interbank lending, because they are eligible if you want to turn them
into cash more quickly,” said Keeble.

“The whole structure has changed.”

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