Fear over capital in bank street feeds recession wind in main street

Standing left to right – Mr. Dinesh Jebamani (Chief Manager Liability Product Management and New Age Media – Seylan Bank), Mr.Sudesh Peiris (Senior Manager – Digital Banking Channels – Seylan Bank), Ms. S.Senevirathne (Representative of the Revenue Department – Western Province), Mr. Tilan Wijeyesekera (Deputy General Manager – Retail Banking – Seylan Bank) and Mr. Malik Wickremanayaka (Deputy General Manager – Operations – Seylan Bank)

PARIS, October 10, 2008 (AFP) – Businesses needing cash by the end of the month or students seeking a loan for this academic year can expect a hard time at the bank despite blockbuster steps this week to burst the credit dam. The official onslaught — huge bank bailouts, savings protection, floods of central bank money and a rate cut — is failing to revive stressed-out stock markets.

And the main lending markets behind global credit are all but closed for business, economists say. Money market interest rates are at record high levels, impervious to all attempts to bring them down.

The way these signals, known by such names as interbank, Libor and Euribor, move will largely determine the depth and length of the recessionary storm in the making.

Linkage — or coupling — between advanced and developing economies spreads the shocks of downturn or recession, since emerging economies depended heavily on exports to Europe and the United States, economists say.

Analysts for Citigroup bank in London said: “The failure of the policy response so far means that the risks of a major global economic downturn are rising by the day.”

“As for emerging markets…our economists never believed in the decoupling