Last summer the front page of every major European business newspaper, periodical, or website all had the same headline “Subprime Rate Crisis”. Alongside the mathematical geniuses of our time are some of the world’s most notorious idiots. Some of the more prominent lenders in the States banded together with their European banking allies to give out mortgages that literally seemed to never end, at higher than the going, current (prime) interest rate. The famous subprime rate, offered individuals of dubious credit the opportunity to buy expensive pieces of real estate at higher than normal interest rates. The problem comes in when interest rates rise to very high levels, the way they did in 2007, causing homeowners to default on their loans.

The fact of the matter is that once everyone realized the credit crunch was affecting banks, the rumours began to also influence the market itself. Higher interest rates around the globe have since heated up the world economy in a futile attempt to control the crisis.

The subprime crisis of ‘07 is not over yet. Banks are just now coming out with massive write-downs and losses resulting from the crisis that is costing European and American banks major off-the-balance sheet earmarks, and special provisions. In fact, most banking institutions have started to safeguard cash at all costs to sustain what some are calling a subsequent liquidity crisis.

The furious fight for new customers has begun and some banks are banding together in a type of consolidation that has yet to completely take off. According to the Economist, there is talk among European banks, that certain Spanish and Scandinavian banks are offering informal or special interbank lending rates. This is the rate at which banks loan money to each other. Normally, the amount of money lent is in the billions, but for very short periods of time. Banks will even wait until the end of the day before soliciting funds from another bank, just to see exactly how much money they will need to cover some of the losses resulting from foreclosures and subprime rate mortgages.

The other side of the coin is the fact that banking institutions that were involved with the subprime rate scandal, have suffered massive losses in share value as a result, which makes the possibility of hostile takeovers or mergers much more attractive. The latest move seems to be from East to West, with Chinese insurer Ping An, vying to increase their stake in Fortis, while others cite movement here in Europe in a battle royal for Bankinter.

Whatever the case, the fact of the matter remains the same. Banking institutions that were not involved in the subprime rate crisis are looking to take their share of the banking sector away from their suffering competitors in a rather unfriendly way, and there is nothing to keep them from dictating some of the upcoming trends in business. Not even the European Central Bank nor the U.S. Federal Reserve Bank has the power to stop them. Their extraordinary assistance of injecting currency into the economy may appease short-term liquidity, but not the overall structural damage caused to deposits and client revenue.