GOLD 0.51% $1,391.7 gold futures

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  1. 7,411 Posts.
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    Hi there wombat53

    "What am I missing?"

    Let's be under no illusion that European banks are doing it tough. But what is not clearly understood that some of their toughest problems are regulatory (heaped on them by the governments):

    - European quantitative easing is more of a penalty to the banks than help. QE increases the level of reserve deposits the ECB hold from European banks. These have a negative interest rate, which is an effective tax on the banks. (If I had some spare time I would calculate exactly how much this costs the banks - possibly has high at €10 billion per annum across the European banking system.)

    - European banks (and banks everywhere) are being forced to increase the capital adequacy ratios. DB was at 11.1% at the end of 2015 and has since increased them to 12.5%. Increased ratios make the banks safer, but it kills the capacity to grow, and they become much less profitable.

    Is there a case for buying gold in here?

    No really. Banks are safer with respect to default risk, but they are crap when it comes to investment returns. I am happy to deposit my money in a European bank (I bank with Banco Santander), but I wouldn't buy their shares.
 
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