Banks: it feels like 2008 again
Bank shares have plummeted in recent days. Falling house prices and rising foreclosures have caused investors to wonder whether we are in for a rerun of 2008.
Banks are back in the headlines for all the wrong reasons. Following reports of a credit squeeze in the European interbank market, this week US banking giant Bank of America (BoA) saw its shares slump again. They've lost a third of their value since the beginning of the month. Investors fear the bank will have to raise at least $50bn in new capital because it is exposed to the deteriorating housing market. Swiss bank UBS will axe 5% of its staff, or 3,500 people. European banks have slashed a total of 60,000 jobs this year, 50,000 of them in Britain.
What the commentators said
The jobs "bloodbath", as Jonathan Evans of Sammons Associates described it, is due largely to the investment banking sector. It "briefly enjoyed a false bubble" after the 2008 crisis, said George Hay on Breakingviews. "Reduced competition meant those left standing could fill the departed's boots" in areas such as fixed income and commodities trading. But markets weakened last year and kept sliding this year. As uncertainty has risen, investors have cut back on trading and demand for mergers and acquisitions work and flotations has fallen. New regulations are raising costs.
As for BoA, nobody is convinced it has enough money to offset the fact that foreclosures and early arrears among borrowers are high and rising while house prices are still sliding, said Tom Bawden in The Guardian. The cost of insuring its debt against default has hit record levels. The "stroke-inducing levels of anxiety affecting the banks", said Phillip Inman, also in The Guardian, "feel like a re-run of 2008".
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.
-
Michelin Key Hotels 2025: the top destinations in the world
The Michelin Keys have been awarded to spectacular hotels across the world. From Marlon Brando's private resort in Polynesia to a Bvlgari hotel in Tokyo, we look at some of the most extraordinary stays in 2025
-
MoneyWeek news quiz: How much could you get in car finance compensation?
The car finance scandal, inheritance tax, and house prices all made headlines over the past few days. Test your knowledge while reviewing this week’s top stories with MoneyWeek’s news quiz