Bloomberg talks to Johnson’s Andrew Karolyi about ‘across the pond’ investment exposure
The professor of finance says that true transparency about U.S./Euro bank interconnections is key to alleviating investor fear
Andrew Karoly is a Professor of Finance, Co-Faculty Director of the Emerging Markets Institute (EMI) & Alumni Professor in Asset Management at Johnson
Excerpt from “Citigroup, Goldman boosted french bank ties before rout”(Bloomberg, Aug. 15)
“There is a great cloud of uncertainty that’s hanging over the U.S. banks about the full extent of the exposures they have to French and other European banks,” said Andrew Karolyi, a finance professor at Cornell University in Ithaca, New York. “The market is clearly not reacting well to what they’re seeing.” …
The 2008 financial crisis showed how the interconnections between financial institutions worldwide can cause risks in one company to spread around the globe. Three years later, investors remain unaware of U.S. banks’ Europe-linked risks, Karolyi said.
“As investors in these banks, we crave greater clarity about the full extent to which they’re laying off their exposures and how and in what form,” Karolyi said. “A little bit more transparency would go a long way to alleviating a lot of investors’ concerns about the extent of these exposures.” MORE