the npls are going up.anks are tremendous earnings engines. >> as a regulator are the european banks prepared in case of a leave of the. -- vote. >> yes, i think so. banks are aware of the risks. by the amount of exposure that we identified out there, yes, banks will be resilient to such a hypothesis. , wertheless, it happens will have a negative impact. >> how negative? >> very difficult to gauge. it depends on many unpredictable reactions of economic actors in markets. certainly one could expect turbulence and financial markets during a time. could >> even more turbulence than we have seen in the last six months? >> that turbulence was quite significant of the beginning of the year has subsided. see.ll very difficult to really predict the degree of the effect that will be produced by -- by such an event. certainly i hope it will not materialize. >> month sees the june 23 referendum on britain on whether or not to stay in the european union. which way would you like that to go, and wife -- why? thousands o

clearly, npl's are likely to rise from where they are.conomy is a complex, enormously complicated set of things going on, moving from an export led economy to a domestic demand economy, moving from a savings economy, consumer savings, to consumption. all of these changes are not going to happen without some bumps. sure, npl's are going up in the bank, no question about that. but the four big chinese banks are earnings engines at the same time. >> as a regulator, are the european banks prepared in case of a leave vote? vitor: we think so. banks are aware of the risks that exist. many have edged as much as they can against those risks. and judging by the mounds of exposure that we identified out there, yes, banks will be resilient to such a hypothesis. if it happens. nevertheless, we will have for a while negative impact. >> how negative do you expect that to be? vitor: very difficult. it depends on many unpredictable reactions of economic actors in markets. certainly, one can expect turbulence in financial markets during that period of tim

clearly, npl's are likely to rise from where they are.nomy is a complex, enormously complicated set of things going on, moving from an export led economy to a domestic demand economy, moving from a savings economy, consumer savings, to consumption. all of these changes are not going to happen without some bumps. sure, npl's are going up in the bank, no question about that. but the four big chinese banks are earnings engines at the same time. >> as a regulator, are the european banks prepared in case of a leave vote? vitor: we think so. banks are aware of the risks that exist. many have edged as much as they can against those risks. and judging by the mounds of exposure that we identified out there, yes, banks will be resilient to such a hypothesis. if it happens. nevertheless, we will have for a while negative impact. >> how negative do you expect that to be? vitor: very difficult. it depends on many unpredictable reactions of economic actors in markets. certainly, one can expect turbulence in financial markets during that period of time.

npl's are going to rise.nomy is a complex , enormously complicated set of things going on, moving from an expert loop economy to a domestic demand economy, moving from a savings economy, consumer savings, to consumption. all of these changes will not happen without some bumps. are going up in the bank, no question about that. but they are tremendous at the same time. >> as a regulator, other european banks prepared -- or the european banks prepared in case of the vote? >> the banks are aware of the risks that exist. as much as they can against those risks. and judging by the mounds of therere we identified out , the banks will be resilient for such -- if it happens, of course. we will have for a while negative impact. >> have negative do you expect that to be? -- how negative do you expect that to be? >> very negative, many economic reactions in markets. one can expect turbulence in financial markets during a period of time. >> even more than the last six months? >> yeah, of course. at the beginning of the ye

guest: we are a little more lax when recognizing npl. the number should be quite higher., you add in npl and they are at 5% already. standards are being complicated now. they are moving toward western standards and the numbers should be higher. thatad: you are suggesting it is not 1.6, but closer to 70%. -- 17%. that is a huge difference. guest: it is really bottom up. we look at all the companies and look at if they recovered interest. what that tells you, if you cannot pay interest, you are in bad debt. whether you recognize it or not. the market will recognize it very fast. rishaad: one reason they are there is a good the lack of reform from the government and enterprises. there are some signs of that changing, is there not? guest: very slow, because the economy is difficult this year. it slowed down a lot of reforms. financial reforms, they are pushing ahead, but generally they have slow down -- slowed it down. rishaad: and job losses, that is the fear. that is what chinese authorities are dealing with with the population. they are keeping the jobs. guest: it is a pol

clearly, npl's are likely to rise from where they are.is a complex, enormously complicated set of things going on, moving from an export led economy to a domestic demand economy, moving from a savings economy, consumer savings, to consumption. all of these changes are not going to happen without some bumps. sure, npl's are going up in the banks, no question about that. but the four big chinese banks are tremendous earnings engines at the same time. >> as a regulator, are the european banks prepared in case of a leave vote? vitor: yeah, we think so. banks are aware of the risks that exist. many have hedged as much as they can against those risks. and judging by the mounds of exposure that we identified out there, yes, banks will be resilient to such a hypothesis. nevertheless, if it happens, we will have for a while negative impact. >> how negative do you expect that to be? vitor: very difficult. it depends on many unpredictable reactions of economic actors in markets. certainly, one can expect some turbulence in financial markets during t

that probably means using paris stable companies to buy npl.is just ruthless with what he wants to do. david: i am a banker. francine: tomorrow, coming up with a talk about that very fund. my final question to seth is that, david is arguing that there is much more concern about the banks in periphery instead of the banks or the health of china. with, the systemic risk -- all due respect, none of these european banks are. seth: i think that the systematic aspects of the european banks have been diminished a lot, thanks to the target system that the ecb has put into place. you are absolutely right. but there could be major stresses from southern european banks. we think that is something to worry about. china is also something to worry about, and this goes back to the theme that volatility will be a big problem that will be with us for a long time because all of these structural issues will take many years to work out, and along the way there will be bumps and the market will probably overreact. tom: 20 seconds. the dollar, long or short? david:

we know that npl's are a problem for italian banks -- is that we should focus?is the challenge? viola on theceo of conference call certainly emphasized missed half the house before him to reduce the incidence of nonperforming loans. he says that banks are on track to meet this target of 3.5 billion euros of leverages over the next two years until 2018. he didn't really talk a lot about finding a merger partner. perhaps he is betting that this will take care of itself. once the bank shows continued improvement on this theme, in this quarter, then obviously the bank's chances of finding a partner will increase. this is a bank that lost half its market value so far this year, if you remember. guy: yeah. -- great stuff. thank you. dan leaf. that's the story, but it is only part of the banking story. if the big week for european banks. we have had earnings from many, many of the big players in europe, in what was a fairly harrowing bank earnings season. >> we are seeing a very challenging environment, because none of the issues we have had in the last few quarters ar

the npl's are likely to rise. that is obvious from where they are currently.he chinese economy is a complex, enormously complicated set of things going on moving from an export load economy to a domestic demand economy. moving from consumer savings to consumption. all of these changes will not happen without some bumps. the npl's are going up of the four big chinese banks are tremendous earning engines of the same time. stephen: speaking of the challenging environment, you have a 33% growth venture which is the maximum allowed. the brokerage venture. before that you had it five years ago. givenyou ever consider, the complexity of the market, going it alone if they were to raise the ceiling to allow you to have it or is the joint venture partnership the best way to go? >> you have to live in the world as it is. long-run, we always like to earn a control the businesses we have around the world. in the medium-term, we have often gone into markets in a joint venture type structure. you have the advantage of the local expertise. it has been a great partnership for

missionint, part of its is to deal with npl's and this will take time.ine: there has been a lot of investors thinking this big news affect has gone. would you tell them to give you more time or were you disappointed? pier: there is no new information about atlante with .hat is available why are the markets disappointed today rather than a week ago? let's imagine a world without it, we would be in a worse situation. francine: there are other banks to tap funds. the sufficient -- be sufficient? criticalo not see many situations in the banking landscape. francine: where do you see vincenzo? as a possibility of being a strong business model. atlante looking for private equity funding? pier: it is privately run and privately owned, and developing longer-term strategies. is a medium to long-term instrument which needs a medium to long-term strategy. francine: d you have an opinion on the role of private equity, what that should look like? think there are big opportunities in the italian banking sector because the government has introduced several reforms to st

npl is going to rise.nese economy is a complex , enormously complicated set of things going on, moving from an export led economy to a domestic demand economy, moving from a savings economy to consumption economy. all of these changes are going to happen without some bumps, and the npl's is going up. arefour big chinese banks tremendous earning engines at the same time. >> you have a 33% joint venture, which is the maximum allowed, the brokers joint venture. before that, you have the sec before the five years ago, would you ever consider, given the complexities in this market, going alone if they were to raise the ceiling to allow you to have 100%? was a joint venture pressure to -- joint venture partnership the best way to go? wees: over the long run, like turning control the businesses we have around the world. in the medium term and short run, we often got into markets in a joint venture type structure. you get the advantage of the local expertise, it's a great institution it's been a great partnership

in pl'sy they should be -- npl. who pays?ination fiscal plus, the monetary, the government and the bank will likely face that together to formulate the funds. this kind of corporate restructuring is a down service to economy growth. there should be some layoff at the same time, they should be increasing risk in the corporate bond market. probably the corporate will likely reduce their pay tax to maintain some of the liquidity. all of this restructuring is a risk to economy growth. the labor market as well. for the monetary easing is necessity. yvonne: could we see more downside? : this year the be ok -- the bank of korea was 2.8%. the data was up for april. we think the q2 gdp will be 2.5%. not much different from the q1. that means there is a downside risk. yvonne: internally we see domestic conditions have deteriorated. external demand -- let's talk about that. we have seen stabilization in the chinese data of course, but can you say the economy has reached firmer ground? : it symbolizes -- it is good for china's domestic d

. >> are you worried about liquidity con teenagean if the banks go under because of npl? >> i don't shall the four banks are state owned. 80 some odd% of the four big banks. i don't think that is a risk on any level. what i think needs to be sped up or actually articulated better is the move of provincial debt into a municipal bond market. the whole idea with the u.s. savings & loan crisis in the 1990's is happening in china where they'll take provincial, nonperforming scary debt and move it into some asset. so the risk in china right now is that they don't produce a yielding asset onshore and money keeps looking abroad. >> capital control is done. all right. thank you so much for that. we got to go. all right. our brand new show "bloomberg markets middle east" is coming up at the top of the hour. what do you have for us today? >> angie, very good day to you. we have got an action packed show. we'll kick it off with a conversation. i had a discussion about oil, the region where he sees the best investment. side by side with that we'll break it down. what is the bigger con