Clemente Gnarra, MBA MIP
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Signals coming from different sources seem to reassure the good financial health of the banks. Or, at the least, they seem to suggest one important thing: the worst is over.
Share prices are on average surging, and looking at the nation where the world crisis started, the US Secretary Timothy F. Geithner said in a press briefing that there are clearly signs of improvement and, finally, data reports that the US bank have raised more then $ 200 billion since January.

But if we look forward, some problems (seemingly) will affect the banks for a long period: the bad loans and others bad investments the banks have done until the crisis started some months ago, still represent an economic problem for the banks assets. And, probably, some financial troubles will negatively affect the banks reducing their ability to make new loans, so undermining one of the most crucial bank activities and making the global path to recovery very slow.
And what about European banks?
According to a Washington Post's analysis, the European banks are (in terms of recovery) far behind those in the United States in clearing bad loans off their books and may need additional capital injections of up to $1.2 trillion, according to a major International Monetary Fund (IMF) report released weeks ago.
According to the same IMF financial stability report, the downturn, even if it started in the United States, could be longer in the European zone and also more costly for Europeans to fix it.
Giving some data extrapolated by IMF report, U.S. banks have written about half the estimated $1.1 trillion in troubled loans and toxic assets off their books. But European banks have moved much slower, so far writing off less than 25 percent of the $1.4 trillion in bad debts.
The reason of the delay seems to be simply the fact that as the crisis began in the United Stated, the U.S. financial institutions have had more time to cope with it.
However, Jean-Claude Trichet, president of the European Central Bank, has confirmed that he believes the banks and the world economy will recover in 2010 after a "very bad" 2009. He added that he believed current stimulus plans were "generally sufficient".
But the IMF still believes that European governments must do better in cleaning up its banking sector.
"It all depends on how efficiently the banks are cleaned out" In fact, according to the IMF, a lack of a coordinated and aggressive cleanup plan for euro-zone banks could hamper economic recovery in the 16 countries that share the euro. "To secure recovery and a return to self-sustaining growth, policy makers need to take further decisive action, especially in the financial sector," the IMF said in its twice-yearly assessment of the euro-zone economy.
The report lauded policy makers for the massive bank-rescue and fiscal-stimulus packages already launched and praised the European Central Bank for an "impressive" crisis response. But it also said "a key missing element is a proactive strategy to deal with a weakened financial system."
On the same line, Marek Belka, head of the IMF's Europe department, said the European Central Bank called on governments to coordinate in taking toxic mortgage assets out of the region's struggling banks.In Italy the situation seems to be a bit better. Thanks to a less aggressive behavior inside the riskier finance, almost all the Italian banks have avoided the “first part” of the crisis related to bad debts like the subprime ones. In that case the “Italian system” simply registered some millions of losses against billions registered in some other European banks and about ten billion in the United States. But since the latter half of 2008 the interest rates began to go down, the banks have been forced to declare asset devaluations that, if are lower compared to the ones declared by foreign banks, are at the same time very grave for the Italian banks assets worth, just lowered by past mergers and acquisitions.
And, also in this case, the result of what is written above combined with the difficulty to make profits due to the current financial crisis, can reduce the banks' ability to make new loans and so the national economical and social crisis will take much more time to be overcome. The Governments, in Italy like in all the other countries, play a very important role to help the “systems” cope with the crisis. Transferring money to the banks, they can help the economies recover on condition that the banks correctly play their role: to support and to fund the economic growth of the country.