Short Selling Ban In Europe Part 2 - Not Stopping The Fear

Posted by Kris | Friday, August 19, 2011 | | 0 comments »



The short selling ban in EU like what was implemented in the US during the 2008 financial crisis is not very effective as history repeats itself. The ban will spur rallies as it kills off shorts but after a few days, the weak fundamental will rears its ugly head , and the banking stocks will eventually plunge by genuine sellers aka NOT short sellers (since they have been banned) . 
Moral of the Story: Banning Short Selling Don't Really Cure the Market decline. It just gives temporary relief like a painkiller. Euroland going to "Holland" soon....
PARIS (AP) -- European bank stocks tanked Thursday as fears mounted about their exposure to the region's debt crisis and weakening economy.


The stock prices of Britain's Barclays and France's Societe Generale led the way down, falling 11.5 percent and 12 percent, respectively. Germany's Commerzbank fell 10 percent.
Analysts said the plunge was partly a reaction to evidence that European banks are being forced to pay more for the short-term loans they need to finance day-to-day operations.
Some European banks with heavy exposure to the debts of Greece and other weak countries are relying on loans from the European Central Bank because other private banks are reluctant to do business with them. The ECB said one bank, which it didn't identify, had paid above-market rates to borrow $500 million a day for seven days.
No bank had requested such a loan for nearly six months. Analysts said fears about one bank's troubles are enough to spark concerns about the entire industry.
"These are worrying signs," said Neil MacKinnon, an economist at VTB Capital in London. "You could think of it as a mini-Lehman moment: There is the risk that a major eurozone bank might be a casualty."
In 2008, the investment bank Lehman Brothers collapsed, causing the global credit markets to freeze up. Banks refused to lend to each other because they feared more failures and greater losses. Companies and consumers couldn't get loans.


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