When the largest investment bank on the planet deals with you, you have to read carefully what it says about you. Much more when it puts crucial dilemmas on you, (especially for the few banks we have left), such as whether it is worth being “first in the village or last… in the city”. In a recent report on the Greek money market and the AA, JP Morgan says “whole” that it is not in the best interest for the Greek market to soon pass into the category of Developed Markets (obviously because of the debt upgrade in IG). On the contrary, it “explains” that if it wants to have the intense interest of investors – as recent decentralizations from the HFSF prove – it must stay as far as it can, that is, in the category of Developing Markets. JP Morgan therefore says that it is wrong to estimate many investors that Greece will return to MSCI DM indicators (developed markets) and that this will be a positive factor in attracting capital. “We disagree with both statements,” its analysts argue because: Greece’s move to the developed markets is extremely unlikely, a transition to the DM markets will be a ‘limiting’ factor in attracting investors. Its relative reference to 2001, which the corresponding upgrade reduced instead of increasing investment interest, is enlightening. But it doesn’t just stay there. He explains that this upgrade to Developed Markets, however, considers it extremely unlikely. But still technically not impossible. Its main argument is the recognised reality that in the Greek financial market there is, neither scope nor depth, such that it can gain dimensions and character of an Developed Market. The tables he cites are highly convincing in terms of numbers. It also makes particular mention of the Greek systemic banks which record the “good”, but also the “bad” that do not allow current data to support an upgrade of the domestic market (the elements it cites are extremely convincing). Of course, as it should have been, it explains that the institutions through which such upgrades are initiated by MSCI EM to MSCI DM have the possibility to speed up the slow procedures that would normally “see” such an upgrade in mid-2026. One would therefore say that if that is the case … “first in the village rather than last in the city”, the proverb says. The dilemma and Mrs Buch But the truth is that “time” is not always the same and the current timing does not seem to be the best to be outside the “mantri” (with good … meaning). Yesterday the new head of the SSM (ECB), the German Mrs Buch (he succeeded our well-known Mr Andrea Enria) gave an interview with the FT. We note what was the most powerful point of its statements. So Mrs Claudia Buch (President of the ECB Supervisory Council, or SSM), said, “we are already seeing an increase in loan defaults and dues”. For this reason SSM and itself leading it, considers that ‘banks should be durable and sufficiently capitalised to be able to absorb potential losses’. Why? Because they have to be able to handle themselves by now. And in order to do that, it must not only be further difficult to provide loans, but also – mainly – for banks to increase their reserves. This (why) which Mrs Buch did not say, Mr Stournaras said a few days ago, stating with greater sincerity, as he said in our column, that in 2024 the ECB would withdraw from the financial markets around EUR 800 billion liquidity. Which means that the financial markets of Europe and the banks will miss … some trillions (some tens of times ‘borrowing’ of the ECB’s 800 billion) of what they have had to date. And this will happen in circumstances that Mrs Buch said, banks will have to put more money aside (predictions) to deal with the new “red loans”. Those that have already begun to come to the 2024 horizon by increasing interest rates and slowing down economic activity in the EU… In these circumstances, therefore, the domestic money market should probably seek – especially for the banking system – to speed up integration into the MSCI DM, as well as the Euro-system (the ‘mantri’) can hope for support initiatives if and when needed. Besides, we’ve learned for the last 12-14 years, what… happens when there’s trouble. Well said by JP Morgan, but also Mrs. Buch who knows the store inside, probably knows better.
J. P. Morgan “knows” better, for Greek banks, or Mrs. Buch (ECB/SSM)?
—