Greece News Won't Change Risk Trends

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

By Lena Komileva

NEW YORK (BBH FX Strategy) -- Back in April we argued that the ever-growing eurozone crisis would increase pressure on the European banking system, which would increase banks' structural liquidity demands in the near future.

The markets' pricing of the sovereign-financial link and the associated capital shock had started from the depressed levels of a "no-contagion" scenario and presented clear upside risks to European bank's collateral funding costs.

Thus, we argued that the European Central Bank's relatively hawkish position and the increased systemic risks in euro markets would probably translate into increased structural demand from European banks for the dollar as a better liquidity alternative.

In a broader sense, our prediction was that signs of slowing U.S. growth and the intensification of the Greece solvency crisis would channel investors' focus toward capital risks, as opposed to cheap financial leverage, as a more important driver going forward.

It is the end of the second quarter, and indeed the world is a very different place. Macroeconomic and financial volatilities are higher.

We recently have argued through every hand-wringing twist and turn of the Greek story that a resolution on a second deal would have to be found, because the cost of a policy error that unleashes another global capital crisis would be far greater than the financial and moral hazard costs of bailing out a noncompliant borrower.

The International Monetary Fund made the first step, by separating the ends from the means and agreeing to release the next Greek tranche based on economic conditionality, rather than on Greece's ability to service its debts and avoid insolvency in the next 12 months.

In Europe, Chancellor Merkel has signaled that Germany is prepared to make a compromise on the terms for bondholders (no soft restructuring or any other borrower hit) and it will work with the ECB on a mutually acceptable solution for the second Greek deal.

For all the noise, it was clear all along that there was no way for Germany to go it without the ECB. Without the ECB's involvement, Greece wouldn't be solvent and the market wouldn't be in a position to participate in a debt rollover.