Some details and numbers make this question necessary
The possible defaults for the KBC are around 22 billion Euro at least for the moment which is
- bigger than the budget of the Flemish regional government and so the bank has to ask for help from the Belgian federal government and so its frenchspeaking counterparts. But is has no political credibility or sympathy on the other side of the regional divided Belgium because it has built its political and ideological image on the success of the 'dynamic' flanders region against the french-speaking static old fashioned regions. The representatives from these regions are quite sarcastic now and without compassion.
- much bigger than value of the bank on the the stockmarket and even of the sum of the available capital of the major investors from Flanders. The more the value of their stock diminishes, the greater the difference.
They have said they will have to disinvest and get their capital back to their base. They have now investments and loans in Poland and other countries in Eastern Europe and Ireland. They will have to sell some of these quite fast and so at a huge loss.
They have promised not to restructure untill the end of this year so there are no economies to be expected from slashing the workforce.
- it is not sure that all risk scenario's for loans are also calculated for the worst case scenario. If the situation gets worse than they planned in Ireland or Eastern Europe, these losses will become greater and loans that were safe will become 'toxic'
After this incident in which they needed an independent outsider to recalculate the costs of some loans and because it seemed that the bank didn't inform its institutional 'investers' (the governments) in february that they will have big problems with some loans because they were not insured anymore, the governments will now have a big problem believing the assessments of the bank itself about the impact on their loans after an eventually further deteriorating situation in Ireland or Eastern Europe.
So is KBC the Titanic just going forward strraight on the iceberg while the bankers are having a party untill everything breaks down and in which the bankers are rescued first or is KBC the Iceberg in which you are never sure what will be under the sea ? Or are they both ?
We who believed that the financial sector was an example of controls and procedures and independent appraisals and audits are proven wrong again. They need much more of that quickly. To restore confidence and trust. First between themselves.