Panic has started.
Discussed by John Hempton in Bronte Capital, Baltic banks are insolvent. The reasoning is the following:
Well if the Lati devalues (as would seem inevitable) then Hansa Bank has to pay Euro to Swedbank – and as its assets are in Lati it would be insolvent.
If the Lati doesn’t devalue its only because people (ie Swedbank) are prepared to continue to fund it. This is not pretty at all. All in Hansa owes Swedbank over 30 billion Swedish Kroner – all denominated in Euro and which can’t be paid. The equity capital of Hansa (roughly 7 billion Swedish Kroner) is also going to default.
To protect Baltic economies, firstly, central banks should have enough willingness and reserves to long Baltic currency and short Euro with gold. While the rest of the world is doing vice a versa. Any thoughts who is able to spend more capital: hedge funds or Baltic central banks?
Secondly, people must inject more Euros to Hansabank, SEB and other banks to diminish their loan-to-deposit ratios and make shareholders of Swedbank calm. Any one is willing to buy litas or kronas from the bank and give them all your Euro savings?
Yes, we do! Banks have been clever enough to hedge their currency risks by lending in Euro to residents of Baltic States. And we have been borrowing in Euro, protecting banks and exposing our own assets. The great scheme that has been working until recently, when borrowing capacity was more or less sustainable.
Today, it’s not true. Banks’ credit risks are topping due to bad loans coming from the Baltics. Inflation does not allow to reduce interest on domestic currency denominated loans and decrease demand for Euro. People do not funds banks anymore. Contracting GDP growth is pushing away foreign investors. Consequently, to make their shareholders calm, both Swedbank and SEB should closed down their Baltic branches. Until they will be forced to.
It is a common fact for everyone that Lithuanian real estate market has been booming in recent time. Involved parties are eager to stress prosperity and enormous returns of the market. For instance, Lithuanian Development Agency whose aim is “to create the common informational Internet platform for foreign and Lithuanian business” loudly presents benefits of the market for foreign investors and local speculators. Ironically, that platform, which did the Ministry of Economy support (and I assume taxpayers’ money was involved there), has also a direct link to a private real estate company, which can further provide you a number of optimistic market’s “bubble-facts”.
I think it is a good moment to realize the underlying environment of Lithuanian real estate market. I would like to present some fresh ideas, but contradicting to official arguments, about past development of the real estate market; its intrinsic conditions; and subsequent wind up. To begin with, I would offer to take a short look at capitalization rate (cap rate) of private real estate in Lithuania.
Read the rest of this opinion »
Greetings to TEO LT!
This open letter deals with the security issue in your Internet connection system and potential threats it might cause for your customers.
As it is assumed, all competitive IT system administrators should know the fundamental rules on password security (one can read an article here, if it is a new thing). But somehow, I don’t know why – your administrators are using THE SAME PASSWORD on some type of hardware – which account for about 20% of long time using commercial Internet users (this information was collected by my self, and I have found about 168 IP addresses from 255×3 with the same password).
Just imagine if a villain is throwing an attack on this issue. First of all, he will have an opportunity to configure the hardware to be accessible only locally. This means that your engineers will have to visit every “hacked” customer and reconfigure the hardware “by hand”. I just wonder, how many companies are using this hardware about which I’m writing here…
To see an example of my words, please refer to the picture below.
Please find time and reconfigure the hardware remotely, change passwords and keep the security in high level. This will help to sustain reputation, profitability and capitalization either.
Best regards,
Anatolij
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