Time for a New Banking Index

Now that governments across Europe have part nationalised the banks perhaps we can get away from the hysteria in the media, which is focussing too much on the market value and not on the underlying. The nationalisation of banks has effectively removed the banks from normal company valuations because of the various terms insisted on by the governments. Perhaps banks should now have their own index where they can all be treated in the same way and where valuations can be consistent. This would be a positive move to gain better and clearer valuations of the overall index.

The speculators will be hovering around the market for sometime and may well test the resolve of the government and how deep their pockets are but it is time to be steadfast. By segregating the banks from the main index it may provide a clearer measurement and more stability.

The real economy should be the focus of the media and market volatility is entirely another matter, although it is more headline grabbing. Markets are always susceptible to the whims of the speculator.

It is possible that the action taken by governments in Europe may have already reduced the severity of a recession but it’s too early to tell. What is clear is that continued collaboration between governments is vital. At this early stage of recovery it is time to sober up and replace market hysteria with long term planning. The markets could help by examining market practice and how OTC could be better managed. This should include the potential of creating a transparent market for OTC and this could also create a new index.