The heavy weight of debts denominated in foreign currency. Borrowing in dollars & euros is cheap until it isn’t.
Big Gamble that was hot for years has gone sour after Turkish lira’s plunge and surge of defaults on bank debts denominated in foreign currency.
Foreign investors are fleeing, worried about surging inflation, deeply negative real interest rates, and a central bank unwilling to crack down on inflation.
Banks are being pushed to lend with the same reckless abandon.
Sales of homes of all types plunged 31% year-on-year, sales of new homes crashed 39%, and the number of mortgages written collapsed 65%
Spanish banks expanded aggressively into Emerging Markets to flee the consequences of the euro debt crisis.
Shifting bad consumer & business debts from banks to the public, but the way this bank bailout got packaged is pretty nifty.
The economic miracle fueled by foreign-currency debt.
After the euro debt crisis, Spain’s alpha-lender sought greener pastures in the Emerging Markets. That bet is coming home to roost.
“Substantial Increase in the Risk of a Downside Scenario”: Moody’s