20/01/2012 World Business Report

Fears rise in Asia over the health of US banks. The crisis of 2008 saw

banks across Europe come close to collapse. They demanded massive

injections of public money to save the system from imploding. This

time, financial regulators want to be ahead of the game. It is a

delicate balancing act. These are the regulators that have given the

bank's a deadline of today to show how they will boost the safety

buffer of cash they hold in reserve. It is a huge hurdle for the worst

affected 32. One of the most troubled is this bag from Italy, it

has raised 7.5 billion euros by selling used up. Its shares has --

have shrunk. They want to see the banks tapping their investors for

more cash. What they do not want to see is what is actually happening

with banks shrinking and lending less to businesses to match their

reduced circumstances. What do banks have to show they can do?

They have to reach the 9% capital target. This credit specialist says

that in demanding recapitalisation, the authorities must walk a fine

line between reassuring investors that banks can handle more defaults

in Europe and not triggering another credit crunch. The answer

for banks is to seek any means possible to raise their capital

levels without going to existing shareholders. One way in which

banks can seek to meet the new targets will be to shrink their

balance sheet. There are a number of ways they can do this. They

could sell assets and curb the amount of credit they provide to

the economy. The risk is that by reducing the amount of credit, it

may curtail economic growth in Europe. Winnow that German, Italian

and Spanish banks have to raise the most. -- we know. Some could be

facing failure. The shake-up of Italy's economy continues this

Friday as Mario Monti unveils new measures to make the country more

competitive. First in line is the de Regulation of services. They

will open up their industry to more competition. Welcome to the

programme. Where is Mario Monti looking to try and find reform and

save money? He is looking at several areas to reignite the

economy. The idea is to bring some free-market procedures into the

taxi sector, a number of sectors that he is targeting, about ten of

them. He is pushing for reforms and has been talking to politicians.

This is not going to be a smooth ride, but he is going to get

support for these measures. It is absolutely not going to be a smooth

ride. Protesters are out and about. Yes, that is true. There are a lot

of corporations that have had a strong position for many years,

they are going to refuse to go ahead with the changes. This is

understandable. I think the options are not that many. He is getting

the support from the political parties, they are not going to take

this at face value. There are going to be some changes made. We are

going to see some compromise on it. Do you think it is possible that

Italy's economy will grow this year? It is going to be a difficult

year. The government is still wrestling with the issue of public

debt, it is trying to reduce that. The public infrastructure will not

make major investments. Some of the service areas are going to be

making some investments... Thank you. Asian markets are hitting a

two-year higher on optimism from Europe. The markets have been over-

pessimistic and they need to see th thbit more? Indeed. They

are seeing the light this Friday. Markets are rising. We have seen

the Nikkei at a two-month high. Essentially, it is an innings from

US banks which were much better than expected. -- earnings. However,

there is a warning. More data from the Chinese economy. Reports

suggest Chinese manufacturing is contracting, that took Chinese

shares off their high. There are lingering concerns about European

shocks. The market predictors are out in force working out ways to

see what investors are going to do this year. That is right. Traders

in the region are winding up their position ahead of Chinese New Year

celebrations. China is shut for one week. Many markets are going to be

shut on Monday and Tuesday. This is the Year Of the Dragon. That is a

particular creature in Chinese culture. It is using wind and water

to predict fortunes. The dragon is not only auspicious but it is

unpredictable. We have a story of two cars. The first half will be

lacklustre. The real turning point will be in August. When the dragon

appears, it is conceded a game changer. It is a big event. It is a

very sharp turning point. The markets could go ballistic or

tumble out right. It is very dramatic. Thank you. I do not know

if we can face more drama this year. Talks between Greece and its

private creditors are set to continue for a third day. Greece

has to hold its debt to get new bonds. It is writing off 50%. The

European Union and IMF say the deal must be struck before the second