As Europe awaits stress test results, the focus of worry has shifted from Britain to Germany’s Deutsche Bank and Italy’s Monte dei Paschi. Both banks have problems with their respective business models, and worsening troubles at either could have ripple effects. A liquidity crisis at Deutsche Bank could force a pause in global transaction processing. The closure of Monte dei Paschi could lead to the failures of two or three other large banks in Italy, perhaps causing a political crisis.
When U.S. real estate hit bottom in 2010, more than a fourth of home mortgages were underwater, with homeowners owing more than their properties were worth. With recovering property values and the effect of six years of regular payments, not to mention a record-setting wave of bankruptcies and foreclosures, that rate has declined to 1 in 18. That’s a big improvement but still a long way from the 1 in 100 to 1 in 200 mortgages that would be underwater in a healthy real estate and lending market.
Cuts: As part of its pending acquisition of First Niagara, KeyBank will close 9 percent of the two banks’ branches. Especially in upstate New York, there are many places where the two banks have branches within blocks of each other. KeyBank says there will not be layoffs as branches are consolidated.
Sharing branches for the past nine years hasn’t worked as well as hoped for seven Kansas City banks with 44 branches, so they will be merging and keeping the name of one of the banks, Security Bank of Kansas City. The combined bank will keep all branches and all employees.
Responding to a nationwide economic crisis in Venezuela, Citibank is closing the central bank’s foreign currency accounts. Citibank did not state a reason, but the bank could have decided it could no longer afford the liquidity risks the accounts represented.