Former FDIC Chairperson Bair Discussed State of the World's Banks on CNBC

Former FDIC Chairperson Sheila Bair joined CNBC's 'Closing Bell' to discuss the state of the banks both domestically and internationally.
By Giovanni Bruno ,

NEW YORK (TheStreet) --With all the challenges facing the world's banks, former FDIC Chairperson Sheila Bair joined CNBC's "Closing Bell" to discuss expectations moving further, domestically and abroad. 

"While there are a few positives, its mostly downsides. One of the downsides is a dramatically reduced likelihood that the Fed will raise interest rates again this year, that's why they're under-performing right now. It could also increase their cost of doing business across the pond," Bair said about the potential impact of Brexit.

Bair believes it is likely that U.S. banks will no longer be able to use London as the launching pad to do business in the E.U, thus potentially leading to increased operational costs. 

"I assume credit losses are going to be up, I think there's going to be a fairly significant impact on the UK economy. If there is a significant downturn in Britain, I think you're going to see increased credit losses," Bair explained of Brexit.

Commenting further on banks domestically, "Banks are going to be looking towards more trading revenues, more fee-based generated revenues. That's what they're going to have to do to maintain profitability. I think longer term well get back into a more normalized interest rate environment, but in the short term there's still going to be a lot of paying. You're going to see a lot more fees probably," Bair said.

"I think we shouldn't panic it's still not clear, I was disappointed to see the loosening of capital standards for banks in the U.K., I don't agree with that because I think you'll see credit losses go up, " Bair said in response to a question on the potential impact on banks abroad, most notably in Europe. 

Moreover, "Europe never re-capitalized their banks the way they should have and so now I think they're in a difficult situation and that's going to create, unfortunately, a lot of pressure to weaken further reforms that have been put in place," Bair added.

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