Reliance on central banks leaves many S banks vulnerable to new crisis

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From Fazle Rashid
NEW YORK, June 29: Many banks in the US and Europe still remain heavily dependent on cheap money provided by the central banks. That reliance leaves them dangerously vulnerable to a new crisis, warned Switzerland-based Bank for International Settlements (BIS).
The BIS has "likened the banking system to a patient that had survived the emergency room but is still in intensive care unit". Some banks still appear to be on life support, the BIS said.
The organisation warned that the central bankers, many of whom had already cut their interest rate close to zero and supplied banks with trillion of dollars worth of cheap cash, had few tools left if there were another big crisis, the New York Times (NYT) in a report said. BIS whose board includes US Fed Reserve Chairman Ben Bernanke and Jean Claude Trichet, President of the European Central Bank (ECB) said "we have hardly any room for maneuvre".
BIS said China will not be able to resist the move of the upward revision of its currency. It repeatedly expressed dismay and anguish over the state of health of the global banking system. Among changes recommended by the BIS include restructuring of banker's pay, removal of incentives to prevent risky investments, increased disclosures by the banks of its holdings and trading activities.
Global efforts to strengthen banks by requiring them to hold more liquid and capital will not undermine economic growth and will have a small and temporary effect on demand, BIS observed. The US and Europe are struggling with is how to avoid having to rescue the too big-to-fail banks. The Fed Reserve would risk its credibility if it bought more more assets to stimulate the economy, a member of the Fed Reserve board warned.