Lena Komileva

I had to watch this video a couple of times. Lena Komileva talks quite quickly, additionally she uses turns of phrase that I am not that used to - the best one I came across was "continuos re-pricing of risk", yep I get it but it takes a moment to get your head in the right place. In the way that all roads lead to Rome Lena is former chief economist of Tullet Perbon (Terry Smith is the CEO of Tullet Perbon)

Lena raises some important issues. Europe impacts global financial stability. Government bonds are held by banks around the world, now the solvency of these governments is in question, the assumption that the bonds were essentially risk free is in question. Currently the European Central Bank is acting as bank of last resort - buying bonds from governments in the eurozone that are under pressure. Politically the ECB has the same troubles as the EuroZone. Can this last, what happens next?

The banking system is only as healthy as the quality of its assets. If the quality of these assets change then you have a sick banking system. Banks hold a lot of government bonds (from around the world), what happens as the risk of these bonds is re-priced? Now here, for me, is the scary bit if the governments themselves are essentially insolvent who can "step up to the plate" who can act as the banker of last resort?

Lena also points out that the banks are more reluctant to lend to each other, this is worrying as this mirrors the troubles of the 2008 crisis, and of course that banking is global, none of these entities are isolated but all interrelated. My understanding is that as well as holding bonds the whole of the financial system is pinned together with 600 trillion of financial derivatives. My guess is that this was a part of what prompted the Fed to bail out financial institutions indiscriminately rather than concentrating on the healthy ones in the last financial crisis.

The video is great and Lena is clearly very sharp indeed.