Banking crisis is ending

WASHINGTON - RENEWED signs of health among big US banks is sparking hope that the credit crisis is over, with the risks diminishing for a new financial meltdown.

Despite a still-fragile situation, some analysts point to easing interest rates, rising stock prices for major banks and the renewed ability of banking firms to raise new capital in the private sector.

This could lead to many banks repaying the US government by repurchasing the shares from capital injections.

'America's banking crisis is over,' said Avery Shenfeld, senior economist at CIBC World Markets, in a recent note to clients.

Mr Shenfeld said one major factor is the drop in the key Libor interest rate for lending between banks 'to the point that indicates that the fear of failure has been shaken out of the system.'

The conclusion of the 'stress tests' of the system along with requirements that major banks raise modest amounts of new capital - which they have been doing - indicates the United States will not allow a failure that could lead to a major shock to the system, said Mr Shenfeld.

'The US will not be left with an empty shell of a banking system, the way Japan was in the 1990s after its equity and real estate crash,' he said.

Numerous banks have been able to raise fresh capital, including Bank of America, which issued some shares to reap roughly US$13.47 billion (S$19.6 billion).

Citigroup, meanwhile, raised US$2 billion in bonds without a guarantee that had been offered by US authorities.

Treasury Secretary Timothy Geithner said on Wednesday that he sees 'important indications that our financial system is starting to heal.' -- AFP


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