When currency risk becomes credit risk

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This topic contains 0 replies, has 1 voice, and was last updated by Profile photo of mike mike 9 years, 5 months ago.

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    Profile photo of mike
    mike
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    This is an interesting article

    http://search.ft.com/ftArticle?queryText=spain&y=9&aje=true&x=12&id=070621000727&page=1

    This statement made me think

    But if investors are unaware of the interdependence of the risks they are running, they may find that their debtors are significantly less creditworthy than they had thought.

    Do British banks lending to British people to buy Spanish property understand the risk in the Spanish property market and do Spanish banks lending to British people to buy Spanish property know how credit worthy those individuals are?

    The article refers to the latest OECD economic survey which discusses how domestic demand has driven the economy, particularly construction and gives six reasons why foreign demand will not be able to replace domestic demand. It concludes that

    A decade or so from today we should have a far better idea than today of how far one of Europe’s hitherto most successful economies is able to thrive within the straitjacket of the currency union.

    It’s all very interesting

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