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Update: World Financial Crisis and GDP projection 2009

Update: World Financial Crisis and GDP projection 2009. Drs. A.G. Romero Presentation CBS, KvK, and BNA June 9, 2009. Returns, volatility, and length of crises in months. Interagency Supervisory Capital Assessment Program.

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Update: World Financial Crisis and GDP projection 2009

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  1. Update: World Financial Crisis and GDP projection 2009 Drs. A.G. Romero Presentation CBS, KvK, and BNA June 9, 2009

  2. Returns, volatility, and length of crises in months

  3. Interagency Supervisory Capital Assessment Program • “Stress testing” coordinated by the IMF for the 19 largest banks in the U.S. (May 2009) • These 19 banks hold two third (2/3) of all assets of the US banking system • Stress test focused on 3 major areas: A. Capital adequacy B. Effective liquidity management C. Effective risk management

  4. A. Capital Adequacy Results stress tests IMF(May 2009) All US banks need $75 billion • Bank of America: 33.9 billion • Wells Fargo: 13.7 billion • GMAC: 11.5 billion • Citigroup: 5.5 billion • Regional Financial: 2.5 billion • Sun Trust: 2.2 billion • Key Corp: 1.8 billion

  5. A. Capital Adequacy (cont’d) Results stress tests IMF(May 2009) • Morgan Stanley: 1.8 billion • Fifth Third: 1.1 billion • PNC: 0.6 billion 11. American Express, 12. BB&T, 13. Bank of New York Mellon, 14. Capital One, 15. Goldman Sachs, 16. JP Morgan Chase, 17. Metlife, 18. State Street, and 19. US Bancorp are sufficiently capitalized.

  6. B. Effective liquidity management • Key question: Can the liquidity of the banking sector fare under the stressed market conditions? • Result: Daily monitoring of the liquidity management of U.S. banks

  7. C. Effective risk management • Adequacy of risk management system; • Counterparty risk; • Credit risk (structured credit products and mortgage lending on HIGH alert); • Monitor the link between risk-taking and compensation; (bonus of top managers); and • Effective internal communication of risks.

  8. Lessons from George Soros • Loan To Value ratio (LTV) is important; • Past experience: Outstanding loans as % GDP was lower than today e.g., 150% in 1955, as opposed to 300% + today (HIGHLY LEVERAGED market); • Mortgage loans was limited to 80% of the value of the properties (in 1950’s); • Loans linked to an investment portfolio was limited to 50% (legal margin) of the value of the portfolio (in 1950’s); and • Concentration risk: Government loans in many countries is the multiplication factor of GDP (Latin-American banking crisis of the 1980’s)

  9. Developments housing prices in the Netherlands

  10. Bankruptcies in the Netherlands

  11. Unemployed personsin the Netherlands (3 months average: 2001-2009)

  12. Dutch security exchange market (AEX-index)

  13. Main developments Netherlands Antilles (real % changes)

  14. Expected developments in 2009 • Slower economic growth of 1.0% due to fewer domestic activities caused by a further slowdown of the world economy. • Lower inflation of 2.1% stemming from decelerating global commodity prices. • Debt relief started in February 2009 (For Curaçao: May 2009). • Lower surplus on the balance of payments due to higher current account deficit combined with lower external financing.

  15. THANK YOU!

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