FCIB's 23rd Annual Global Conference speaker John Ahearn, of Citibank, warned credit managers Tuesday that the problem with European banking debt is not just an economic issue there or even a trade headache for the United States and other exporting powerhouses; it is also a credit liquidity issue going forward on a dangerous worldwide level.
Ahearn reminded Global attendees just how much of a player European banks are in providing liquidity and capital. For example, Spanish banks are keenly important to funding a lot of businesses operating out of South America, including several emerging markets, and Germany is hooked into many parts of Central America as a credit source of massive prominence.
Moreover, many banks involved in providing such credit may have to make tough decisions of what areas and markets they want to focus on in the coming years. What that means is the potential for less liquidity or less favorable terms. It also means that businesses of various sizes that are overly dependent on one multi-national bank could find themselves scrambling to replace them should they exit that company's market.
"Banks are going to have to start making strategic decisions: What markets do I want to be in? We believe there are going to be retractions, and this is going to be global," Ahearn said. "Banks are going to pick products they're good at and exit the rest." In essence: make sure you are using multiple banks so that if the bank you do most of your business with gets out of that business, you have other options.
-Brian Shappell, CBA, NACM staff writer