Sovereign Bank, example the US Federal Reserve. If a Countries Central Bank fails then the country fails. If the country fails the central bank fails. Really very little difference. If one goes under they both do. That doesn't mean the country will cease to exist, but it will be insolvent and unable to borrow except under very unfavorable terms. Example, Argentina.
ah ha!!!!! After hours of diligent research, I've found it!!!!! I've scooped Roubini!!! The Sovereign about to crack is.........FREEDONIA. Go to 1:20 marker. You'll see I am correct. <object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/EDJgPCNzt5E&hl=en&fs=1"></param><param name="allowFullScreen" value="true"></param><param name="allowscriptaccess" value="always"></param><embed src="http://www.youtube.com/v/EDJgPCNzt5E&hl=en&fs=1" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="425" height="344"></embed></object> Man. This is scary. I haven't seen it in years. All Rufus needs is a logo that reads "Leader Elect".
My money would be on Ireland, my ancestral peeps. But that is just a guess, I have no money on it. Hurry up and corner that leprechaun my cheery friends.
This is from Roubini's website "Moreover, in many countries the banks may be too-big-to-fail but also too- big-to-save, as the fiscal/financial resources of the sovereign may not be large enough to rescue such large insolvencies in the financial system. Traditionally only emerging markets suffered â and still suffer - from such a problem. But now such sovereign risk â as measured by the sovereign spread - is also rising in many European economies whose banks may be larger than the ability of the sovereign to rescue them: Iceland, Greece, Spain, Italy, Belgium, Switzerland and, some suggest, even the UK. The process of socializing the private losses from this crisis has already moved many of the liabilities of the private sector onto the books of the sovereign: banks, other financial institutions and, soon enough possibly, households and some important non-financial corporate companies. At some point a sovereign [bank] may crack, in which case the ability of governments to credibly commit to act as a backstop for the financial system â including deposit guarantees â could come unglued.Thus, the L-shaped near-depression scenario is still quite possible â I assign to it a 30% probability - unless appropriate and aggressive policy action is undertaken by the US and other economies.This severe economic and financial crisis is now also leading to a severe backlash against financial globalization, free trade and the free markets economic model. " Dunno to me he still talks about a sovereign bank. To my mind if a bank like UBS goes then that will plunge Switzerland into crisis and that will plunge the entire world into a massive systemic crisis.
Looks like Ireland or Spain are the leading candidates in the EU: From: http://www.cnbc.com/id/29156803
The PIIGS tightened quite a lot yesterday, so looks like Ireland, Greece and the others might be OK, after all. Besides, the Germans are making various noises that they will step in to prop up EU sovereigns if need be. Slovenia (Aa2/AA/AA) was a very interesting case earlier this month. They had a genuine liquidity problem, as admitted by the Economy Minister. To be able to make a â¬400MM redemption payment in March, they had to issue a new â¬1bn, which, thank god, they managed to do with decent subscription in the beginning of Feb.
I think Roubini is talking currency crisis in smaller countries whose banks were heavily geared. Western European banks loaded up worse than American banks in all sorts of debt with their host nation's GDP a fraction of a fraction vis a vis the US. Those central banks can't adequately debase and bail without creating a run on the currency because their economies are too small to absorb it. Austria expects Eastern Europe to default on something like 20% of its annual GDP, in terms of foreign mortgages held by local banks?? Then Germany reversed and said they'd bail Austria if happened. Not much to do except EURO and USD bailout via the IMF or Worldbank. Countries bailing out countries.