Thinking about the American 'bank stress test' worst case scenario of 10.3% unemployment through 2010, we have cause to wonder - based on the following observations:1). The U.S. unemployment rate is currently 8.9%;
2). The same for Spain is 17.4%
3). The U.S. loan delinquency rate, as of the end of 2008, stood at 4.59%;
4). The same figure for Spain appears to be 4.1% at this point in time.
Some suggestions:
1). Methodological differences make the data sets not comparable;
2). The portion of defaults originating from home mortgages will be altered by the fact that they are full recourse in Spain, and non-recourse in the U.S.;
3). One, or both, of the unemployment rates is mistaken.
Keeping in mind that few American banks would be left standing with 17% unemployment whilst only one caja, representing about 1% of the Spanish banking industry, has been intervened - we invite readers to suggest solutions to this conundrum.
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4 Comments:
Isn't this the way they tried to make those subprimes look like AAA paper ... :)
Hyundai is moving up in the world it seems. :)
This is all true, Claus... but you didn't answer my question.
Suggestions 1 and 3 could well both be true, but I think their impact on loan delinquency would be marginal. So I would argue that suggestion/hypothesis number 2 explains this apparent paradox. But this is just a guess.
It would be interesting to find the comparable data for, say, credit cards or personal loans and see whether you still find the same results.
And I will also venture hypothesis number 4: the stonger family structures of Spain acts as insurance against financial hardship. Take the case of the much greater degree of dependece of young people upon their parents until their very late 20s. I think it is fair to assume that an unemployment rate of 37% among Spanish 16-25 year-olds (they account for a fifth of total unemployment) has a much smaller impact on loan delinquency than it might have in the US of A.
Good ones!
Cinco Días reported that consumer (personal + auto) delinquencies were at 11.5% at year end. A reasonable assumption would be that they comprise a smaller proportion of the total than in the U.S., though.
Interesting that taking the UR among the young down to 'mere' 17% knocks 4 full points off the national total.
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