And the current scary story tells only a fraction of the scary possibilities.

Sir the truly frightening figures for bank capital shortfall of €577bn that Brooke Masters and Patrick Jenkins report “Basel reveals liquidity gap for world’s biggest banks” December 17 are even more frightening if one considers that basically no downgrading of credit ratings of sovereigns are included in those calculations.

For instance Spain having recently been downgraded on notch courtesy of the Basel Committees’ Basel II still generates a 0 percent capital requirement… one more downgrade and that could shoot up to 1.6 percent… and then 4… and then 8 percent.